Is inflation coming or is it a hoax? The U.S. Department of Labor announced on Tuesday that inflation has finally arrived, if you know where to look for it. The Consumer Price Index (CPI) measures inflation at the consumer level.

It is important to remember that consumer spending accounts for close to 70% of gross domestic product (GDP). We also need to keep in mind that the Federal Reserve has been pushing its desire to raise interest rates. The stated inflation goal is 2.0% to 2.5%.

Before thinking there is no inflation at all, note that the Social Security general benefits were just increased by 0.3% for retirees. This is a cost of living adjustment (COLA) and is based on the gains seen in the CPI. The next COLA will be issued in October of 2017. Is a 0.3% gain enough?

Tuesday’s headline inflation report showed a 0.3% month-over-month gain for September, matching the Bloomberg consensus and up from the 0.2% seen in August. The core-CPI, which excludes food and energy, was up by just 0.1% in September’s monthly reading. Bloomberg was calling for a 0.2% rise, and this is lower than the 0.3% seen in August.

It is hard to imagine that 0.3% or 0.1% would matter. These don’t sound inflationary at all. What matters here is that the real issue is the year-over-year comparison. Prices and most indexes are generally measured against the prior year when economists measure the economy, and that is particularly true for the so-called seasonal issues that come to play in certain quarters and months of the year.

The headline CPI release showed a 1.5% gain in inflation in September when compared to September of 2015. That is up from 1.1% in August’s annual reading. This is still shy of the 2.0% to 2.5% range set by the Fed to justify rate hikes, but the core-CPI reading was 2.2%, when comparing September’s report to September of 2015. That is down from 2.3% reported in August, but it is well within that threshold for measuring inflation per the Fed’s target.

The year-to-date gain for the all-items index was revised due to prescription prices and was seen up 1.7% in September, versus a 0.6% gain in September of 2015.

Several things are at work here. Energy prices were up 2.9% and rent was up 0.4%. Apparel prices were down by 0.7% and communications prices were down 0.8%. The price for new vehicles was down 0.1%, and used vehicle prices were down 0.3%.

So, we have inflation if you dig for it. Now we just have to see how gasoline and energy prices play a role going forward. Some of the annual readings may look skewed just because of how much the price of oil dropped from the end of 2014 into 2016. Maybe the Fed will have to include an oil price forecasting tool into its mandates and data-dependency.

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