The headlines will read that the Consumer Pride Index rose in August by the most in any single month since 2009.
Consumer Price Index MoM
CPI Ex Food & Energy MoM
Consumer Price Index YoY
CPI Ex Food & Energy YoY
But really, take away fuel costs and the story is quite different. CPI Ex Food & Energy actually rose less than expected.
And limited job opportunities and low wages make it harder for companies to pass along higher commodities prices to their customers. Persistent joblessness along with few signs of a pronounced pickup in inflation is what allowed Federal Reserve policy makers to undertake an open ended QE3 yesterday in an attempt to boost economic expansion.
So, there are at least some signs of inflation in these numbers. Does QE3 plant the seeds for greater inflation later on? Yes, probably. Will QE3 lead to inflation immediately? No, probably not. Does the Fed believe that it can unwind all the QE’s in a manner that will avoid much higher inflation? Yes, surely. Will the Fed actually be able to unwind all the QE’s in a manner that will avoid much higher inflation? That’s the $64 Thousand dollar question.
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury