Headline inflation, as measured by the consumer price index, climbed 0.4% month over month in February the Bureau of Labor Statistics reported today. That puts the year over year increase in headline inflation at 1.7%. (The big increase in the month was in gasoline prices, which climbed 6.4% in February from January.)
Core inflation, which excludes more volatile food and energy prices, was up 0.1% month over month in February. That’s a 1.3% year over year increase in core inflation.
Both measures are well below the Federal Reserve’s 2% inflation target (although the Fed has said recently that it would not raise rates in reaction to a short-term spike above the 2% target since inflation has been stuck so stubbornly below 2% for so long.)
Economists surveyed by Bloomberg had projected a 0.4% month to month increase in headline inflation, and a 0.2% increase in core inflation.
Stocks and bonds both rose today, March 10, on the inflation news on the theory that the Federal Reserve will be less inclined to tighten monetary policy by reducing its $120 billion a month in bond purchases as long as inflation stays below target.
At 3 p.m. New York time the yield on the 10-year Treasury bond was down 1 basis point to 1.52%.
The Standard & Poor’s 500 had gained 0.82% and the Dow Jones Industrial Average was up 1.57%. The NASDAQ Composite had picked up 0.31% and the NASDAQ 100 was ahead 0.16%. The small cap Russell 2000 ws higher by 2.15%. The iShares MSCI Emerging Markets ETF (EEM) had lost 0.30%
Those who follow the ins and outs of the inflation statistics note that the inflation rate is likely to climb in coming months because the measure will be working off a base of sharp price drops a year ago due to the pandemic and the restrictions put in place to slow the spread of the virus. That could well push the annual inflation rate above 2%.
