Today’s update on consumer prices looks less threatening than yesterday’s news on producer prices for November. Whereas wholesale inflation last month was up for both headline and core readings (i.e., less food and energy), this morning’s CPI is a mixed bag. Headline CPI rose 0.4% in November (the highest since June), but core CPI was flat, on a seasonally adjusted basis. This gentle statistical profile all but assures that the Fed won’t raise interest rates at this afternoon’s FOMC announce, assuming they needed another reason to remain dovish.
“Inflation is not a problem and we do not expect it to become one anytime soon,” Brian Bethune, chief financial economist at IHS Global Insight told Bloomberg News before the CPI update. He also noted that “deflation risks have greatly diminished.” In short, we can continue to celebrate…with one eye open.
But, heck, even if this morning’s CPI report was awful, Fed Chairman Ben Bernanke couldn’t raise interest rates on a day when he was named Time magazine’s Man—make that Person of the Year, a.k.a. as “the most powerful nerd on the planet.”