- The CPI Ex Food & Energy for January rose .2% versus estimates of a .2% increase and a downwardly revised .1% rise in December.
BOTTOM LINE: Overall, prices paid by US consumers rose in January by the most in four months, while core prices remained subdued, Bloomberg reported. Energy prices rose 5% in January, the most since September. However, energy has fallen substantially in February. Medical costs rose .1% in January versus a .2% increase in December. A record warm January prevented retailers from discounting as sales accelerated. I expect measures of inflation to decelerate throughout most of the remainder of the year. I also continue to believe we are experiencing a cyclical bout of modest inflation within a secular period of disinflation. This will become quite apparent the next time the U.S. enters recession. Commodity prices have had a significant impact on most inflation measures. I strongly disagree with those who think these prices will remain historically elevated during a recession. Thus, in my opinion, the bond market is looking forward, not back.
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