August CPI Shows Little Inflation, Let QE3 Ride!

The U.S. Labor Department has released its report on inflation. August’s Consumer Price Index, retail inflation, was put at +0.6% on the headline inflation figure and put at +0.1% on the core inflation figure, which removes food and energy.

Dow Jones had estimates of +0.6% on the headline consumer prices and +0.2% on the core CPI. Bloomberg also had the estimates at +0.6% on the headline consumer prices and +0.2% on the core CPI. As far as the prior readings, the initial reports from before showed that the consumer price index in July came in flat, versus no change in June.

Prices at the gas pump showed a 5.6% gain and food prices were up only by 0.2%. This was actually the highest CPI gain in a couple of years, but the reality now is that it just doesn’t matter after this week’s QE3 announcement.

Today’s report is on the heels of a higher wholesale inflation reading via yesterday’s Producer Price Index. What is more important is that today’s numbers really do not matter at all. Ben Bernanke committed to quantitative easing with the commitment to purchase up to $40 billion per month of mortgage-backed Securities and Mr. Bernanke effectively said he was not worried about inflation in so many words.

It is no secret that the price of gas at the pump is higher and that the drought has put pressure on many food prices.

In short, today’s CPI reading was too much in line to matter for a number that likely was going to just be glanced over for the months ahead any way.

JON C. OGG