Actually, That "Red-Hot" PPI Number Just Proved That The Inflation Threat Is A Myth

meat food grocery italy pork


There’s a lot of oohing and aahing over the just-released PPI number, which showed a double-than-expected spike in headline inflation (1.6% vs. expectations of 0.8%) and tame core inflation of 0.2% (stripping out food and energy).Time for the Fed to freak out?

No, in fact, this is just the opposite.

Food and energy are global issues that are far beyond the purview of Fed policy. In the case of food, a lot is due to weather. Energy is pretty closely related to the health of the economy.

The fear, though, has been that food and energy inflation might somehow affect core inflation. Well, that hasn’t happened. In fact that’s cooling a little bit from January, when core was at 0.5%.

We’ll know more tomorrow when we get PPI, but for now, nothing to worry about here.

Don’t miss: Why Bernanke thinks a rise in food and energy prices is no reason for a rate hike >

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