US CPI beats expectations, still below Fed target
Market unmoved by modest uptick, which was helped by sharp rise in shelter component
As we warned yesterday, today’s US CPI number came in above expectations, with the headline number up 0.4% for August (vs. a consensus of 0.3%). The core CPI index year on year change was 1.7%, vs. a forecast of 1.6%, not enough to spook the US bond market, where the 10-year note was down just 1/4 of a percentage point.
With core inflation below the Fed’s 2% target, the market evidently doesn’t expect the Federal Reserve to do very much. The shelter component of the index moved up sharply, gaining 0.5% on the month, its biggest increase in a year, but that appears to be an artifact of measurement rather than a substantial change.