Inflation: A Look Inside the Latest CPI Releases - Doug Short - February 17, 2011 Page 1 of 2

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Inflation: A Look Inside the Latest CPI Releases

Doug Short
By Doug Short
February 17, 2011

Here is a table showing the annualized change over the past three months for Headline and Core CPI.
I've also included each of the eight components of Headline CPI and a separate entry for Energy, which
is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how
inflation is impacting our personal expenses depending on our relative exposure to the eight
components.

 
The Trend in Headline and Core CPI

The chart below shows Headline and Core CPI for urban consumers since 2007. Core CPI excludes the
two most volatile components, food and energy.

Click for a larger image

 
Core CPI is still substantially below the Fed's inflation target of 2%, but both headline and Core CPI
have begun to rise in recent months. If we extrapolate the latest rise over the next year, Core CPI would
hit the Fed's target rate by the end of summer. Of course, monthly CPI numbers are too volatile to place
any confidence is extrapolations of this sort.

http://advisorperspectives.com/commentaries/dshort_21711.php 18/02/2011
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http://advisorperspectives.com/commentaries/dshort_21711.php 18/02/2011