Core Inflation Shows The Fed Is Pushing On A String

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 per cent in October on a seasonally adjusted basis, the  US Bureau Of labour Statistics reported today. Over the last 12 months, before seasonal adjustment the all-items index increased 1.2 per cent, the ex food & energy index increased 0.6 per cent. See the full report here.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since 1957. The second chart gives a close-up of the two since 2000.


On this chart, I’ve highlighted the 1.75% – 2% range, which is generally thought to be the Fed’s target for core inflation, which is well below the range and trending, on an unadjusted basis, downward.


Will the current round of quantitative easing boost core inflation to the target range? Too early to tell, but thus far the Fed appears to be pushing on a string.


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