The Bureau of Labor Statistics (BLS) may have just delivered a stunner of an inflation number. It has been the case for about as long as memory serves that there has been no official inflation anywhere to speak of. The broader inflationary pressure remains subdued due to lower energy and commodity prices.
The Consumer Price Index in January was unchanged for all urban consumers on a seasonally adjusted basis. Before seasonal adjustment items, the all items index increased by 1.4%.
January was noted as a month when an increase in the index for all items, less food and energy, offset a decline in the energy index to being unchanged. The energy index was down by 2.8% as all its major component indexes declined.
The index for all items less food and energy rose by 0.3% in January. What stood out in the BLS report was that the increase was said to be broad based, with most of the major components rising. Increases in shelter and medical care were the largest. Medical care costs were up 0.5% on a monthly basis but up 3.0% on a yearly basis.
Where you are starting to see more inflation is in a year-over-year comparison. The all items index rose 1.4% over the past 12 months, which is much higher than the 0.7% 12-month gain that was seen in December. The energy index was down 6.5% over the past year, but this was shown to be its smallest 12-month decrease since November 2014. The food index was up by 0.8% over the past 12-month period.
The index for all items less food and energy rose by 2.2% over the past 12 months. The BLS noted that this has been gradually rising over the past several months.
Why this 2.2% core inflation matters on a year-over-year basis is that the Federal Reserve is looking for support to keep raising rates back toward a normalized rate policy. The Fed has a 2.0% to 2.5% inflation target, and this is one of the first true readings that gets up into that range.
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