September Consumer Inflation Sets a Record; Core Inflation Tame
Bureau of labor statistics reports a 1.2% increase in consumer prices for urban consumers in September, over August levels. This is the largest month-over-month increase on record. The core inflation number, though, which the Fed and the markets look at most closely, stayed very time, with a 0.1% month-over-month increase. Stocks are heading up, as I type this, possibly buoyed by the tame core number, though also not discouraged by GE's earnings report.
Post-Katrina energy prices led price category increases with a 12% surge over August levels. Not surprisingly, transportation also had a big jump, coming in at 5.1% above August.
Year-over-year topline consumer inflation is running at 4.7%, with core inflation (no food, no energy) rolling along at a cool 2%.
Jumping categories here for a second, it looks like I Bond holders will have some hefty yields come November 1. It's anybody's guess what Treasury will do to the fixed rate component of new issues with inflation numbers like these, but holders of existing I Bonds will, for the next six months, probably be paid yields ranging from 6.7% on recently purchased I Bonds all the way up to 9.4% for I Bonds bought around 1999 and 2000, if Treasury keeps its promise to holders of these issues.