Federal Reserve Remains Unimpressed About Consumer Prices and Inflation

The Federal Reserve made some serious waves at the end of summer when it announced that it was not only disappointed with its inflation targets but that it would target higher inflation while simultaneously pledging to keep short-term interest low for quite some time. Fed Chair Jerome Powell and his team so far have been unsuccessful in getting higher inflation since that time, even though there had been four straight months of gains.

The U.S. Department of Labor reported that the Consumer Price Index (CPI) was flat in October. Higher grocery costs and higher dining out costs were offset by lower prices in apparel and in the home furnishings category.

Prices were also flat in the core CPI reading. This measurement excludes food and energy, as it aims to remove some of the more volatile items from the all-items broader index.

Consensus estimates from the Wall Street Journal were 0.1% on the all-items portion and a gain of 0.2% in the core CPI. Econoday had published consensus estimates of 0.2% on the headline CPI and a 0.2% gain on the core CPI reading.

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Even on the annual basis, those measures of actual inflation are coming in under the new 2.0% floor target from the Fed. The Labor Department reported that year-over-year prices were up by 1.2% on the headline CPI and 1.6% higher on the core CPI.

The current news flow is not giving much attention to headline economic reports. The contested election and the rise in COVID-19 cases have dominated the news, as has news about the vaccine.

With inflation not running rampant, the market doesn’t really seem to care now if prices are a tad higher or lower. That may change, or it may not.

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