PPI suggests inflation over 4%, Fed chooses to look at CPI

Via BLS:

The Fed may be in a pickle soon if not already. While core inflation seems still tame, headline inflation is running higher than expected. And unemployment is not coming down in any real way.

But today, the overall PPI inflation rate remained heated in December with a 1.1% boost after jumping 0.8% in November. The December boost topped the consensus forecast for a 0.9% increase. At the core level, the PPI rate slowed to 0.2% a 0.3% rebound the prior month. Analysts expected a 0.2% rise.

By components, food prices gained 0.8%, after a 1.0% jump in November. The energy component continued a strong upward trend, surging 3.7% in December after rising 2.1% the prior month. Within energy, gasoline spiked 6.4% after jumping 4.7% in November. The core was kept somewhat soft in part by a 0.4% decline in prices for passenger cars.

For the overall PPI, the year-on-year rate increased to 4.1% from 3.5% in November (seasonally adjusted). The core rate firmed to 1.4% from 1.3 the prior month. On a not seasonally adjusted basis for December, the year-ago the headline PPI was up 4.0% while the core was up 1.3%.

Today's PPI numbers will heat up the debate at the Fed during the end of month FOMC meeting as inflation pressures are rising while unemployment remains high. And it is not just energy that is a concern as food prices are being pressured by higher commodities prices.

But as we have consistently maintained here that inflation is inevitable with the amount of massive amounts of money that have been printed over the course of the last 2 years.

Source Bloomberg


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