Tuesday, April 19, 2011

CPI Inflation in the US

Fed Chairman Ben Bernanke and Vice Chair Janet Yellen blame the Emerging Market Economies (EMEs) for their inflation problem. In their opinion, commodity prices are soaring because of surging demand from EMEs. The refusal by Bernanke and Yellen to acknowledge that the Fed’s ZIRP and QE-2.0 might be contributing to global inflationary pressures is bizarre. The Fed remains very US centric and focused on the core CPI, which was up just 1.2% y/y during March. That’s still below the Fed’s “comfort” target of 2%. The headline rate was 2.7% last month, led by a 15.5% increase in energy prices, which have boosted airfare prices by 13.7%.

Food prices are up 2.9% y/y and 5.1% over the past three months at an annualized rate, using the three-month moving average. Tenant rent inflation may also be getting hotter too. It is up 1.2% y/y, and 2.5% (seasonally adjusted annual rate) over the same three-month period.

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