The recent Consumer Price Index (CPI) report shows that inflation remains high. It implies a hawkish Fed and bearish gold.
To paraphrase a famous Pink Floyd song, I wish you weren’t here, inflation! The CPI increased 0.4% in September, after rising 0.1% in August, according to the Bureau of Labor Statistics. The move was slightly higher than expected and occurred despite a 2.1% decline in the energy index. What’s really bad, especially for the poorest households, is that food prices continued to rise. The food index rose 0.8% for the month, the same as August, and was up 11.2% from a year ago.
Without plunging gas prices, inflation would be even higher. Indeed, the core CPI, which excludes food and energy prices, rose 0.6% last month, as it did in August. Increases in the prices of services (medical care, transportation, shelter) were the largest contributors to the increase in the core CPI monthly rate.
On an annual basis, the overall CPI increased 8.2% for the 12 months ending September, as the chart below shows. It’s a smaller number than the 8.3% rise in August but higher than expected (the market consensus was 8.1%). And the annual rate is still hovering near the highest levels since the early 1980s. The core CPI rose 6.6%, which means an acceleration from August, when it increased 6.3%. The rise was also above expectations. Although it seems that the overall index has peaked, at least for a while, the core CPI is once again on the rise, which doesn’t bode well for the inflationary outlook. Inflation simply refuses to go away.Continue reading“While Inflation Refuses to Go Away, Gold Refuses to Go Up, by Arkadiusz Sieroń”

