Inflation Below Forecast, Thanks Mostly To Lower Gasoline Price

The Bureau of Labor Statistics released the latest CPI data this morning. Year-over-year unadjusted Headline CPI came in at 1.47%, which the BLS rounds to 1.5%, up from 1.98% last month (rounded to 2.0%). Year-over year-Core CPI (ex Food and Energy) came in at an even 1.89% (rounded to 1.9%), down from last month's 2.00%.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted data monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.2 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.5 percent before seasonal adjustment.

The all items seasonally adjusted decrease was primarily due to a 4.4 percent decline in the gasoline index. The indexes for electricity and fuel oil declined as well, as the energy index fell 2.6 percent in March after a 5.4 percent increase in February. The food index was unchanged in March, with the index for food at home declining slightly.

The index for all items less food and energy increased 0.1 percent in March, after a 0.2 percent increase in February. The indexes for shelter, used cars and trucks, medical care, personal care, and airline fares all rose in March. These increases more than offset declines in the indexes for apparel, household furnishings and operations, and tobacco.

The all items index increased 1.5 percent over the last 12 months; this compares to 2.0 percent last month and is the smallest increase since the 12 months ending July 2012. The index for all items less food and energy increased 1.9 percent over the last 12 months. The food index rose 1.5 percent while the energy index declined 1.6 percent. More...

The Briefing.com consensus forecast was for a seasonally adjusted MoM -0.1% for Headline and 0.2% Core.

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 the chart below I've highlighted 2 to 2.5 percent range. Two percent has generally been understood to be the Fed's target for core inflation. However, the December 12 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low Fed Funds Rate and quantitative easing) are in place.

Federal Reserve policy, which has historically focused on core inflation, and especially the core Personal Consumption Expenditures (PCE), will see that the latest core CPI is at the near-term target range of 2 to 2.5 percent, and the more volatile headline inflation, at least for last month, is at the same level.