The U.S. inflation report for March had non-seasonally adjusted inflation rising 0.43%, enough to overwrite 5 months of deflation for the September 2015 to March 2016 adjustment period. Inflation ended up rising 0.08% in that six-month period, meaning the Treasury will reset the I Bond’s variable rate to 0.16% on May 1.
That’s down from the current 1.54%, but it is good news for I Bond holders because a negative variable rate wipes out the fixed rate up to that amount. I’ve posted the new numbers on my ‘Tracking Inflation and I Bonds‘ page.
I’ve also posted a more in-depth analysis at SeekingAlpha.com.
Treasury Inflation-Protected Securities 
Just my usual comment I guess. I am sure somewhere in the USA there is someone whose experienced inflation rate is something near what the government puts out. Trouble is I have never met them it seems. So- there are plenty of other naysayers online with the figures to back up the contention that the CPI numbers are a fantasy. Leaving us with…………………..
The non-seasonly adjusted CPI-U is just a weighted national average of prices in cities. The BLS breaks it down into “detailed expenditure catgeories” and their respective inflation rates. The category inflation rates look spot on to me. Most “inflation conspiracy theorists” have a problem with the weightings. The “thinking” goes along the following lines, “I don’t have a pet. So, the inclusion of pet food makes the CPI-U invalid.” There’s some strange stuff in there but it’s just a measure of the inflation rate for goods and services that everybody in the country uses, has used or will use at some point in their life. As such, it’s pretty indicative of the overall inflation rate in the country. As far as TIPS goes, you know what it’s based upon before you purchase them. So, if you don’t feel it’s accurate, don’t by TIPS. Basing Social Security benefits on it is a whole other matter. Social Security should have an inflation index that’s more representative of the actual expenditures of seniors. Obama and his Republican buddies wanted to do the opposite. Pelosi actually stated that it would “save” Social Security. Thanks goodness that whole “budget compromise” went down the tubes!
I will probably write more on my thinking on the fixed rate before May 1. But right now I am just guessing the Treasury might hold the I Bond fixed at 0.1%, and for the EE Bonds, too. However, under ‘normal’ circumstances, with the 10-year TIPS at about .2%, there’s now way the Treasury would keep the fixed rate at 0.1%. It would go to 0.0%. The problem, though, is the very low variable rate.
And as usual, the wild card is the fixed rate — which affects EE Bonds as well, which I would like to start buying when/if the rates begin to tick up.
I see your answer came. Thanks.
So, given your understanding of what has and will happen, will you wait until November to buy your 2016 I bonds, or will you pull the trigger in May?
Right now, I’d say I am most likely going to wait until November. The most I could lose is the 0.1% fixed rate.
Excuse me. I meant to ask if you’ll move before May. Thanks as always for your excellent reporting.