economy Markets

The Most Irrelevant CPI Report In History?

Things have changed.

Exactly nobody cares about this right now, but alas, it’s something that needs to be kept “back of mind” (so to speak) given the policy reviews being undertaken at the Fed and the ECB, and given that the entrenched disinflationary trend across developed economies is now colliding with a pretty epic demand shock from COVID-19 containment measures.

US consumer prices rose 2.3% YoY in February, a tad hotter than expected (2.2%). The MoM print was above consensus too, printing 0.1% versus an expected 0.0%.

Core rose 2.4% YoY, also ahead of estimates, and the swiftest in five months.

“Increases in the indexes for shelter and food were the main causes of the increase, more than offsetting a decline in the energy index”, the BLS said. “The food index increased 0.4 percent over the  month, with the food at home index rising 0.5 percent, its largest monthly increase since May 2014”.

“The index for energy fell 2.0 percent in February, with all of its major component indexes declining”, the release adds. The color on energy is somewhat amusing and it should be even more so for March. To wit, from the February release:

The energy index declined 2.0 percent in February after falling 0.7 percent in  January. All of the major energy component indexes declined over the month. The gasoline index fell 3.4 percent in February after a 1.6-percent decline the prior month. Before seasonal adjustment, gasoline prices fell 3.8 percent in February.  The fuel oil index fell 8.5 percent in February.

Again, this is all meaningless for two reasons.

First, the Fed’s decision calculus is now almost solely focused on staying ahead of the curve when it comes to virus, and they’re failing miserably in that regard (or at least according to some market participants and one extremely irritated president). The BOE’s well-received “package” approach is likely to highlight Powell’s perceived shortcomings. The Fed is going to cut again, aggressively.

Second, oil prices plunged the most since 1991 on Monday – perhaps you noticed. So, you know, things have changed…


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