CPI comes it at lower than expected

Core CPI prices were again lower than forecasts, remaining unchanged in April. The year-over-year core CPI inflation rate slowed to 0.9% from 1.1%. Overall CPI prices fell 0.1% in April and the year-over-year headline CPI inflation rate slowed to 2.2% from 2.3%.

BOTTOM LINE: There can be no denying that the CPI data have been very benign over the last three months and there is a whiff of deflation in the prices of goods (as opposed to services). The core goods price deflation story, however, is not corroborated by either producer prices or import prices at this point but, given the 9.9% unemployment rate and the hold that the Phillips Curve has over the economics profession, the risk of deflation is likely to receive more attention for a little while. Our view is that this is likely to be a short-lived phenomenon and, as indicated by $1,200 per ounce gold, monetary conditions across the globe are not conducive to deflation. However, neither these inflation data nor the unemployment data will give the Fed cause to change its extended period language in June.

Source RDQ

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