June 14, 2017 – The Consumer Price Index (CPI) tells us of any inflationary pressures in the economy. The CPI measures the average price levels of a basket of goods and services purchased by consumers. The index starts with a base time period (1982-1984, currently) and shows the overall increase since that time. As with many economic indicators, it can be volatile from month to month with food and energy prices often leading the volatility.
The Consumer Price Index fell -0.1% in May, missing expectations of staying flat. Core CPI, which excludes food and energy rose slightly at 0.1% but missing consensus of 0.2%. Year-over-year CPI is now up 1.9%. Core CPI is also up 1.7% over the last year. Energy is down -2.7% with volatile gasoline prices down -6.4% in May.
Lower energy and lower volatile gasoline prices contribute to a slight fall in CPI. Take-out food and low energy prices, we see an increase in core CPI. The lower figures did not prevent the Fed from raising rates, but in her statement Chairwomen Yellen did cite expectations of inflation to remain somewhat flat and below 2% in the near term and that the Fed is monitoring it closely. There is a 40% probability for at least one more rate hike in 2017 before the Fed turns to the balance sheet at the end of the year; dependent on data that is given.