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Core CPI Rises 2.0% Driven By Surging Rents, Giving Fed Green Light To Hike Rate
Just hours before the FOMC sits down in the Marriner Eccles to discuss just how it will announce the first rate hike in 9 years, 7 years to the day after it cut rates to zero, it got the best gift from the BLS it could have asked for: core inflation rose precisely the amount the Fed wanted from a year ago, ot 2.0% on the dot, the highest annual core CPI increase in the past year. Why the jump? "About two-thirds of this increase is accounted for by the shelter index, which rose 3.2 percent over the span."
This took place even as the CPI for energy Fell 14.7% Y/y; while fuel oil plunged 31.4% from a year ago, which meant that the headline CPI increase from a year ago was a far more modest 0.5%, which still was the largest 12 month increase since the 12-month period ending December 2014.
On a monthly basis, headline CPI came in unchanged, declining from the 0.2% increase a month ago, as the indexes for energy and food declined in November, offsetting an increase in the index for all items less food and energy. The energy index fell 1.3 percent, with all of the major component indexes declining except electricity. The food index fell 0.1 percent, as the index for food at home fell 0.3 percent, with five of the six major grocery store food group indexes declining.
The full breakdown by components is shown below:
But, as noted above, the one key index that mattered was the core annual change, which was driven almost entirely by rents. Here are the details:
The index for all items less food and energy increased 2.0 percent over the past 12 months. About two-thirds of this increase is accounted for by the shelter index, which rose 3.2 percent over the span. The medical care index increased 2.9 percent over the past 12 months, and the indexes for education, motor vehicle insurance, tobacco, alcoholic beverages, personal care, recreation, and new vehicles also increased. The indexes for apparel, airline fares, communication, household furnishings and operations, and used cars and trucks are among the indexes that declined over the past 12 months.
Here is the one chart, which according to the BLS, mattered most for determining rising prices:
One can only hope that the Fed, in its attempt to stabilize core inflation, manages to tame surging rents with its 25 bps rate hike, otherwise it may find itself in a very unpleasant situation of chasing record asking rents across the nation and pushing rate hikes far more often than those hoping for a dovish rate hike would like.
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UST's have been saying rate hike on since yesterday. May be time to play some Vol for the epic fireworks.
Wait, are we reading this right? Moar people cannot afford to buy a house and are therefore forced to rent, and this is the stick save grandma was looking for to green light the rate hike?
Futures say prepare the launch pad.
https://www.google.com/search?q=rentistoodamnhigh&espv=2&biw=1280&bih=92...
I stopped on my way to work this morning to ask the homeless under the highway if they thought the economy was overheating.
Exactly 2%, what a coincidence from the Bureau of Lying Statistics (BLS)!!
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Hillary Clinton runs that business?
Inflation is real? No shit Sherlock.
This is like your proctologist admitting (with hands on both of your shoulders) that it ISN"T his finger in your backside.
We know what inflation feels like, and CPI ain't it.
pods
'what you're seeing is not inflation'
-Part-time Jedi, Full-Time Social Security Inflation Adjuster
Ha!
Surging rents?
Who caused that? Instead of allowing housing prices to seek their own level, free
money allowed corporations to buy up most of the empty units. Now they want to make
money.
Flat incomes kept ownership out of reach, but now rents are too.
This bubblle is for the big real estate investors.
Private Equity and others use zirp to buy up SF homes for rental programs (subsidized by GOV) increases rental rates.
Now they will unload rental income to ?.
Go ahead.... pull the trigger grandma.....
Fed's been pumping up asset prices. Houses go up, so do rents.
Instead of 1 roomate you need another to help pay the inflated prices. In some areas you need more.
Higher CPI and Gold is down, makes sense.
wont happen this time either
Remember as we see Fed buying of SP500 futures this morning, that we have unlimited money. As long as we remain unaudited, we can get away with pretty much anything we want.
Despite the fact that most stocks are declining, as long as we prop-up the main indexes, we will have accomplished our mandate to keep the facade alive until the end of this presidency.
Then we will let the market drop a bit (aka, spin and rinse) before our next injection of trillions of prop. Enjoy risk free investing compliments of the Fed!!!
Aint Fiat Great!!!
Ready to watch your favorite investment slide even further down the toilet tomorrow, Zero Hedgers?
Me too!
You're totally in a position to be smug.
One side has 5000 years of human history and the other has more debt than all of human history combined and the years from 1971-2016.
I know I put my money on American exceptionalism. /sarc
Yes. I am ready to watch mayhem in the Bond Market as investors dump low yield Treasuries in order to garner higher yield Treasuries.
It is too bad that all of those lower yield Treasuries will be heavily discounted as there will be a surplus on the Market.
The Bond Market Meltdown is going to make my day.
I am also pleased that it will be increasingly more difficult for the Government to pay the Interest Charges on its ever growing National Debt.
And I will be laughing as $800 Billion Bernanke Bux are rammed up your arse.
Pleeeeeeeze Janet. Raise thse rates. Collapse the Bond Market please. (And I never used a Sarcasm tag...because I really want her to do this.)
Then Bail In Amerikan Patriot's 401K or IRA in order to buttress your banks as he does not need it.
So what was COLA increase for Social Security again ?????
0%. lol.
Definitely less than the real 6-8% rate of inflation!
Sshhh! Not supposed to ask that!
these guys make FIFA look like choir boys.
Make it up as you go. 1 reports negates 50 that show we are collapsing? Amazing!
Hmmmm. High rents means greater demand than supply for housing. Higher rates means less supply of housing. Yeah...that will work great. Along with the lower wages which come with higher rates. But fear not, the government has compensated in advance by isolating housing by shifting to zero down no doc mortgages. It's all good.
My nanogenerarian aunt will finally start getting some interest income. Of course that will be more than offset by the capital losses on her bonds. It's all good.
What a ka-winky-dink! Fed hits their target inflation mandate the day before they're supposed to hike rates.
this is bullish. rents are paid TO yellen's friends BY people she doesn't give a rat's ass about.
I kinda feel like youse guys keep forgetting healthcare. Last year I spent 10k on healthcare or about 25% of my net. It just keeps chugging along, ever skyward, never ever goes down. Ands its nasty expensive-putting energy and food costs somewhere down the list.
Funny how all data comes together perfectly exactly on the 7 year anniversary. Some would even say uncanny. Hey - lets get this show on the road - raise them rates!!
Shemitah!
The rate increase: it's mostly a psychological thing. The Fed goal is still perfecting how to make their friends and bankers rich without sinking the ship. They forgot where markets came from.
The Kike will Hike.....
They hit the number on the nose, shocking
/srac
Silly stupid goyim. Listen to your rabbi. Rents been steadily going through roof several years. Now we act surprised? Haha. All things goyim need to live been steadily rising for years. But in last quarter of fed fiscal year 2015 we tell you no inflation. Why? Because we use 4th quarter to ‘calculate’ COLA for SS and other payments goyim spent life working for and taxed for. LOL! After we screwed you one way, now we screw you another way. We always screw you stupid goyim every which way coming and going. Heh heh. Oy vey!!!
I dinged you for your use of the word goyim.
"The shelter index", what a disgusting euphemism for people losing most of their already low wages to just subsistence fixed costs. It wasn't me, it was the "shelter index"! A phrase only really rich people would love, so sterile, so superficially "fair".
How convienient.
A Chinese finance blogger just said he expects a major collapse in the yuan and rally in USD due to the Fed hiking 3 times. He didn't know where inflation might come from, but there's at least one source in rents.
Welcome to stagflation. Feds are so fucked.
The CPI-W went from 232.373 in October to 231.721 in November. Fuck that 2% core CPI. That's for those rich fuckers. Us Baloney and bread common people rely on the W numbers.
I'm hoping that when the real estate bubble finally pops, I'll be able to buy a house at a reasonable price in cash or metals. I'm also hoping that I can bribe my way past the out-fucking-rageous closing costs here in Nazi York.
Is this realistic? Don't know. But a man can dream! Besides, I hear property in Aleppo is already dirt cheap, so there's that!