Inflation Continues To Tick Upward And There’s No Sign of It Stopping

About a month ago we argued that inflation is going to happen, and that the Fed can’t control it because many of the factors driving raw material costs are independent of US monetary policy. Today Bloomberg has this nice chart showing trends in US inflation.
Core CPI over 6 and 12 months

All figures are for the core Consumer Price Index, which excludes food and energy. The Fed likes to look at this index because excluding these items makes it more stable. Nevertheless, it is somewhat misleading because food and energy are a significant part of most people’s budget.

The white line shows how consumer prices changed from a year ago. It shows inflation to be pretty stable at somewhere around 1-1.5%. The red bars show the annualized change in consumer prices from six months ago. Over the most recent six months, prices have increased over 1.5%, which translates to over 3% per year.The pace of inflation has definitely picked up, and it will probably continue to do so.

We have emphasized before that the Fed’s measures to flood the market with easy money will cause inflation and bubbles. Inflation is beginning to become visible. Bubbles are almost certainly forming somewhere, but they haven’t grown to a size where they are easily detectable.

Posted by Martin Gremm (Pivot Point Advisors)

About the author

Marc Schindler, CFP®

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