The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.5%.
Both food prices (down 0.1%) and gas prices (down 2.4) contributed to the flat inflation number. Core inflation – which strips out food and energy – was up 0.2% in November and now has increased 2.0% over the last 12 months. That’s right on the Federal Reserve’s target, although the Fed tracks a slightly different index.
Today’s numbers shouldn’t sidetrack the Federal Reserve’s expected move to slightly raise short-term interest rates after its meetings conclude Wednesday afternoon.
Holders of Treasury Inflation-Protected Securities and I Bonds are also interested in non-seasonally adjusted inflation, which is used to adjust the principal balance on TIPS and set future inflation-adjusted interest rates for I Bonds. In November, the CPI-U inflation index fell to 237.336, down 0.21% from October’s number.
For the current I Bond adjustment period (September 2015 to March 2016) inflation is running at -0.25%.
I have updated my Tracking Inflation and I Bonds page with these new numbers.
Treasury Inflation-Protected Securities 
John, that’s complicated. But the next year should be a good time to begin buying TIPS, with real yields now rising to more reasonable levels. If you had a ladder with TIPS maturing every year, you could use the maturing TIPS to pay the required minimum distribution. You could do that on the secondary market, or buy 5- and 10-year TIPS at auction each year until you have every year filled in for 10 years, then just buy 10-year TIPS each year with the money you are reinvesting.
I’m trying to make a plan to transition my SEP/IRA over the next decade from mostly stocks to mostly TIPS. My mind boggles at the required calculations, mainly because of the range of assumptions involved: what percent of my account I move into TIPS annually, what maturity of TIPS to use, the offered interest rates, actual inflation accrued to maturity, how much RMD I need to withdraw annually, and the performance of the rest of my portfolio which will be in equities. I could write code for this calculation if I knew some reasonable assumptions and had a better idea of how the factors might interact. Has anybody already addressed this problem, or part of it?
Joe, inflation from September to March will set the inflation-adjusted rate for I Bonds at the next adjustment on May 1. It doesn’t affect your principal or the interest rate you are currently earning. There are four months to go until the May 1 number is set, so right now that -0.25% isn’t great, but it could turn around by the end of March.
Question: with regard to :
“For the current I Bond adjustment period (September 2015 to March 2016) inflation is running at -0.25%.”
How does this affect my current Ibonds?
Thanks. Joe