Nov CPI was flat headline m/o/m but rose .2% ex f&f. Expectations were up .1% for both. The y/o/y gain is 3.4% headline, down from 3.5% in Oct and 2.2% core which is the most since Oct ’08. This compares with the avg MMA/Savings account yield of .14% according to Bankrate.com and the Nov 1.8% y/o/y gain in avg hourly earnings. Keeping a lid on headline CPI was a 1.6% drop in energy prices led by gasoline. Food prices were up .1%. OER, 25% of CPI, rose just .1% m/o/m and is still not fully reflecting the rise in rents which is happening as ‘rent of primary residence’ rose .2% m/o/m and 2.4% y/o/y. Vehicle prices fell by .3% as both new and used car prices fell. Apparel prices rose .6% y/o/y and are now up 4.8% y/o/y. Commodity prices overall, 40% of CPI, fell .3% but are still up 5.3% y/o/y. Bottom line, in the Fed’s eyes and in the view of most economists, inflation seems benign and contained because they look at the rate of change rather than the absolute index. The index itself is just a hair shy from the record high reached in Sept which is another way of saying the cost of living has never been greater. Price stability that is not and has a negative impact on an economy where wages and interest income are growing less than the rate of change in inflation.
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