"This is stagflation: the Fed is increasingly f#*ked," exclaimed one veteran trader as Core CPI - among The Fed's favorite inflation indicators after PCE - surged to +2.3% YoY, the highest since Sept 2008. This is the 10th month in a row above the Fed's mandated 2% 'stable' growth as shelter and healthcare costs continue to surge.
Core CPI growth above Fed mandate for 10th month in a row.
Healthcare and Rent are soaring (bottom right)...
As the cost of living under a roof at night continues to outpace headline inflation...
And Medical Services rose the most since Nov 1982 MoM...
The index for all items less food and energy increased 0.3 percent in August, following a 0.1-percent increase in July.
The shelter index continued to rise, increasing 0.3 percent after a 0.2-percent advance the prior month. The indexes for rent and owners' equivalent rent both rose 0.3 percent in August, as they did in July. The index for lodging away from home turned up in August, increasing 2.0 percent after a 2.4-percent decline the prior month. The medical care index rose sharply in August, increasing 1.0 percent. The hospital services index rose 1.7 percent, and the index for prescription drugs advanced 1.3 percent. The index for motor vehicle insurance continued to rise in August, increasing 0.5 percent. The apparel index increased 0.2 percent, and the index for tobacco rose 0.7 percent after falling in July.
In contrast to these increases, the index for used cars and trucks continued to decline, falling 0.6 percent in August, its sixth consecutive decrease. The indexes for household furnishings and operations, for recreation, and for airline fares all fell slightly in August, each decreasing 0.1 percent. The indexes for new vehicles and for alcoholic beverages were unchanged in August.
It appears the untenable Keynesian dilemma of 'stagflation' - as profiled in April - is upon us.
Incidentally, we previewed the soaring rent and healthcare inflation back in June of 2015 (and correctly predicted it would take the BLS a year to realize what was painfully obvious to most) when we warned how the Fed would make a major mistake by not hiking when it should have last summer. Now, it's too late.