Consumer prices send mixed inflation signals

Anybody looking for clarity about inflation in the consumer prices report (Consumer Price Index) for March on Tuesday was disappointed and had to settle for mere nuance. Yes, the headline inflation rate was up a heavy 0.6% in a single month, but ex food and energy was up only a very modest 0.1%, or 1.2% annualized, which is towards the lower end of the Fed's target range of 1% to 2%.

Another way of looking at core consumer prices is to average the past six monthly readings to get a more stable read of where inflationary pressure appears to be trending. The past six months of core consumer price changes were +0.1%, +0.1%, +0.1%, +0.3%, +0.2%, and +0.1%, for an average of +0.15% which annualizes to +1.8%, which is towards the upper end of the Fed's range, which isn't so great. If you look at the actual data, the six-month gain is an annualized +1.89%. So, by at least by this one reasonable measure, the Fed is doing a fairly good job, but needs to do better. As I said, you have to resort to nuance to draw any strong conclusions from this data.

-- Jack Krupansky