The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% in April on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. This number, which was expected, resulted in an inflation rate of 2.0% over the last 12 months.
Holders of TIPS and I Bonds have a key interest in the non-seasonally adjusted number, which is used to set increases in the principal of TIPS and the inflation-adjusted interest rate on I Bonds. In April, the non-seasonally adjusted CPI-U also rose 0.3%, and 2.0% over the last 12 months.
Behind the increase. The costs of fuel and energy were volatile. The price of gasoline rose 2.3% in April after falling 3.4% over the last two months. But the cost of fuel oil fell 3.0%, and electricity dropped 2.1%. Food prices rose 0.4%.
The Federal Reserve has stated repeatedly it would like to see inflation rise to 2.0% and with April’s increase this ‘headline’ number finally reached the goal. Core inflation – which strips out food and energy – rose 1.8% over the last 12 months.
You can read more about inflation in Michael Ashton’s excellent E-piphany blog, and he was on fire today:
So, with the wonderful perfection of timing that is only possible from elite policymakers, the Fed has begun to chirp about deflation fears at just exactly the time that core inflation is turning higher. Do recall that core inflation never got below 1.6% – very far from “deflation” …
This chart from the BLS shows the trend of gently increasing inflation over the last 12 months:
I have updated the Tracking Inflation and I Bonds page with the new numbers. This page tracks non-seasonally adjusted inflation.
Treasury Inflation-Protected Securities 
I guess I’d be willing to accept 2% annual inflation for the next 50 years. But the problem for the Fed is when you try to increase inflation, desperately, you can easily overshoot the target. A lot of factors are holding inflation down right now, but things could change quickly if the global economy strengthens.
Ever notice how no one, well no one allowed on the major media, ever comments “Well the government, through the Federal Reserve, has determined to steal 2% of your wealth annually.
This is primarily to ease it’s own debt burden of course.” I suppose James Grant (Grant’s Interest Rate Observer) would say it, but he is rarely allowed on the major media. Even if one only had 500,000 dollars it would amount to 10,000 dollars per year.