Feb CPI rose .4% headline, the most since April but in line with expectations. The core rate was up .1%, below the estimate of .2%. The y/o/y gains were both in line at 2.9% and 2.2% respectively. Energy prices were up 3.2% m/o/m but food prices were flat. While actual ‘rent of primary residence’ rose another .2%, owners equivalent rent, 24% of CPI (asking home owners how much they think they can rent their home for, thus very subjective), was up just .1%. Apparel prices were down by .9% after a .9% gain in Jan. Vehicle prices were up .2%. Commodity prices ex food and energy were up just .1%. Bottom line, headline CPI is now above the Fed’s new target rate of 2% for a full year. Also, to put the sharp move higher in the 10 yr yield this week to 2.33%ish in perspective, we are now back to where we were before Operation Twist was 1st discussed in late August and actually implemented at the Sept FOMC meeting. All those $100’s of billions spent just to keep rates unchanged.
The 1st look at UoM confidence in March saw an unexpected decline of 1 pt to 74.3 from Feb. That’s versus expectations of a gain to 76 and the modest decline is likely due to the spike in one year inflation expectations to 4.0% from 3.3%, the highest since May ’11. We can of course point our finger directly at gasoline prices, which are up another .07 w/o/w, for the jump. Current Conditions rose 1.2 pts but the Outlook fell 2.3 pts.