January Inflation: What It Means for Your Savings

Do AI innovations signal the end to human journalism? Let’s take a look.

And now, for something completely different on a Saturday morning, I asked Bing.com’s new ChatGPT-powered software to write an article on January inflation, in the style of Tipswatch.com. I gave it no more information. The top headline was written by Bing; the links you see in the article were created by Bing. And here we go:

By Bing

The latest inflation report for January showed that consumer prices rose 6.4% from a year ago, slightly higher than economists’ expectations. This was mainly driven by increases in food, energy and housing costs. The core inflation rate, which excludes food and energy, was 6% (wrong; it was 5.6%), also above forecasts.

These numbers indicate that inflation remains elevated and persistent, despite some signs of moderation in recent months. The Federal Reserve has acknowledged this challenge and has signaled its intention to raise interest rates several times this year to combat inflationary pressures. However, some Fed officials have also expressed caution about tightening monetary policy too quickly or too much, given the uncertainty about the pandemic and its impact on economic activity.

So what does this mean for your savings? If you are holding cash or low-yielding fixed-income investments, you are losing purchasing power every month as inflation erodes your real returns. To protect your savings from inflation, you may want to consider investing in Treasury Inflation-Protected Securities (TIPS), which adjust their principal and interest payments based on changes in the Consumer Price Index (CPI).

TIPS are currently offering attractive real yields across all maturities, ranging from 1.60% to 1.80% (wrong; current range is 1.45% to 1.55%). This means that you can lock in a positive return above inflation for up to 30 years with TIPS. Moreover, TIPS also offer tax advantages if you hold them in tax-deferred accounts such as IRAs or 401(k)s.

Another option to hedge against inflation is to buy Series I Savings Bonds (I Bonds), which also pay interest based on changes in CPI but have some additional features that make them more flexible than TIPS. For example, I Bonds have no maturity date (wrong; it is 30 years) and can be redeemed anytime after one year without penalty (except for three months’ interest if redeemed within five years). They also have a maximum purchase limit of $10,000 per person per year and are exempt from state and local income taxes.

The current composite rate for I Bonds issued from November 2022 to April 2023 is an impressive 9.6% (wrong; it is 6.89%), which consists of a fixed rate of 0% (wrong; it is 0.4%) plus a variable rate of 9.54% (wrong; it is 6.48%) based on CPI data from September 2022. However, this rate will change every six months depending on new CPI data released by the Bureau of Labor Statistics. Based on current projections, the variable rate for I Bonds issued from May 2023 to October 2023 could drop significantly to around 3.5%.

Therefore, if you are interested in buying I Bonds at their current high rate, you may want to act soon before they reset in May. You can buy I Bonds online through TreasuryDirect.gov or through payroll deduction plans offered by some employers.

In summary, January inflation was higher than expected and poses a risk to your savings if you don’t take steps to protect them from losing value over time. TIPS and I Bonds are two options that can help you preserve your purchasing power and earn positive real returns amid high inflation.

— End of Bing article —


If you want to compare, you can go back and look at my original article on January inflation, from which Bing “borrowed” information without linking to the actual article. (It did link to my Inflation and I Bonds page, however.) My article includes helpful charts, something Bing lacks at this point.

Bing’s writing style is crisp and clear, with no spelling errors — certainly in the style of Tipswatch.com! I like that it expanded the topic from January inflation to focus on its effect on your savings and then suggest I Bonds and TIPS as a possible solution.

Bing made some puzzling errors. Where did it get a core inflation rate of 6.0% instead of the actual 5.6%? And it ran into serious problems when it tried to explain the current variable rate and fixed rate of I Bonds issued through the end of April. The answer was right there on the page it was referencing:

I Bonds purchased from November 2022 through April 2023 will pay an inflation-adjusted annual rate of 6.48%, and when combined with a fixed rate of 0.4%, creates an annualized composite rate of 6.89% for six months.

Overall, this attempt was a fail. However, it probably would have gotten a B in a college freshman econ class. Think the professor would have caught those mistakes?

Crosschecking with Google search

Was Bing’s incorrect information too difficult to find? Let’s see how Google search does with these specific questions:

What was the January core inflation rate?

Answer: 5.6%. Correct.

What is the maturity date of an I Bond?

Answer: 30 years. Correct.

What is the current real yield of a 30-year TIPS?

Answer: 1.63%. That was correct on Thursday, but Friday’s close was 1.49%, based on Treasury estimates.

What is the current I Bond composite rate?

Answer: 6.89%. Correct.

What is the current I Bond fixed rate?

Answer: Nothing specific, but does link to correct page on TreasuryDirect.

What is the current I Bond variable rate:

Answer: Nothing specific, same link as above.

What is Bing Chat?

Bing is Microsoft’s search engine and it has gotten a lot of attention in recent weeks as it began rolling out its artificial intelligence chat feature, which can answer questions in expanded (and possibly thoughtful) discussions.

Microsoft calls this “your AI-powered copilot for the web.” It says these features are all powered by an upgraded version of GPT 3.5, the OpenAI language model that powers ChatGPT.

I asked Bing how it is powered and it responded:

Bing chat is powered by a combination of natural language processing, machine learning and artificial intelligence technologies. These technologies enable me to understand your messages, generate relevant responses and learn from your feedback. I’m always trying to improve my skills and knowledge.

Microsoft calls its version of the AI software the “Prometheus model,” apparently named after the Greek god who gave humans fire (and thus, technology). Of course, a quick search with Bing would show that Prometheus is also a 2012 film, the fifth installment in the Alien franchise. It’s a horror film about an android with a high level of artificial intelligence.

My feedback is that Bing wrote a convincingly authentic article with several major errors. It still needs work, but … whether we like it or not … it marks a step toward a complex and possibly confusing future.

* * *

Feel free to post comments or questions below. If it is your first-ever comment, it will have to wait for moderation. After that, your comments will automatically appear.Please stay on topic and avoid political tirades.

David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.


About Tipswatch

Author of Tipswatch.com blog, David Enna is a long-time journalist based in Charlotte, N.C. A past winner of two Society of American Business Editors and Writers awards, he has written on real estate and home finance, and was a founding editor of The Charlotte Observer's website.
This entry was posted in I Bond, Inflation, Investing in TIPS. Bookmark the permalink.

28 Responses to January Inflation: What It Means for Your Savings

  1. Henry Fung says:

    Well, at least it didn’t try to woo you away from your wife, so that’s a plus. https://www.nytimes.com/2023/02/16/technology/bing-chatbot-microsoft-chatgpt.html

  2. loupass3 says:

    Hi David, what’s your view on Australian inflation linkers? Duration preference?

  3. Suh Lyle says:

    I think everyone is being too hard on this ChatGPT-powered software, this is a work in progress and every day the system will learn more unlike many of us. Reminds me of google search that we now take for granted, back in 2001-2002, search gave you a million gazzalion answers most of which had little or no relevance to your request. But the search engine learned, just like AI will. So lets revisit this topic in 3-5 years and ask it to write once again on this topic.

  4. ReaderInCA says:

    Also, shouldn’t treasures be mentioned as a high-yield vehicle for savings?

  5. ReaderInCA says:

    Re: I-Bonds, it says “They also have a maximum purchase limit of $10,000 per person per year.” Not at all true. https://thefinancebuff.com/how-to-buy-i-bonds.html#htoc-purchase-limit

  6. Patrick says:

    David, I suggest you ask Bing AI how the fixed rate for I-bonds is determined. Since this has no answer, the question may put it into an endless loop, like asking it to calculate the exact value pi.

    • Tipswatch says:

      Answer: “The formula that the Treasury uses to set the I Bond’s fixed rate is not explicitly stated in any of the search results. However, it is likely based on some factors such as market conditions, inflation expectations and other savings products.”

      • Patrick says:

        First sentence translation: I can’t find any answer in my search results.

        Note that it says “not explicitly stated”, which suggests it found some “implicitly stated”. I’d like to see those.

        Second sentence translation: The usual generalities.

        The first sentence is not bad, although it could be more definite. The fact is nobody knows (except those who set the fixed rate of course and they aren’t saying). The second sentence is just fluff.

        • Paul R. says:

          The most explicit answer I’ve ever found was in the CFR, Title 31: “The Secretary, or the Secretary’s designee, determines the fixed rate of return. The fixed rate is established for the life of the bond. The fixed rate will always be greater than or equal to 0.00%.[1] The most recently announced fixed rate is only for bonds purchased during the six months following the announcement, or for any other period of time announced by the Secretary.”

          Since we are discussing what I think everyone has agreed is an AI that has issues, whether due to its “youth” or the algorithms with which it was programmed, I think it may be a stretch to assume that there are any implicitly stated results merely because it responds that it couldn’t find an explicitly stated result.

  7. gponym says:

    Since ChatGPT effectiveness is on the table:

    a prescient article from 2020: https://nautil.us/welcome-to-the-next-level-of-bullshit-237959/

    grappling with ChatGPT’s willingness to just make stuff up https://talkingpointsmemo.com/edblog/a-bit-more-on-the-ai-inaccuracies

    Not a total luddite, I think that LLM’s like ChatGPT may over time find a place in my toolbox. However, the tasks they may excel at are not necessarily all those which have thus far gotten so much publicity.

    To put this otherwise: it may be that ChatGPT is better at emulating Elon Musk’s approach to the real world than at evaluating that approach journalistically. (Yes, I realize that Elon Musk is not mentioned in Tipswatch, but ChatGPT is to some extent a creature of Musk.)

  8. Sal says:

    The writing style is good, but the main problem I see, and I think it is a fatal one, is that the article doesn’t provide any references to show where the information came from. Knowing where the information came from is just as important as knowing what the information is. The Web is filled with information that is biased, outdated, debatable, or just plain wrong. Without knowing the source, there is no way to judge how current or reliable the infomation is. With Google, at least I know where my information is coming from. As a former college professor, I would give an article without any references a C at best, but more likely a D since a lot of the information is wrong.

    • Tipswatch says:

      Bing Chat generates an article with “footnotes” linking to web sources after certain sentences. I converted those numbers into links in the relevant sentences. Going back I noticed that the 6.0% core inflation rate was drawn from an inflation article from January 2022, not 2023.

      • Sal says:

        Okay, that helps. But evidently it didn’t provide sources for all the information it reported since you said: “I have NO IDEA where it came up with the goofball variable rate of 9.54% for the I Bond, a number that has never existed as an I Bond variable rate.”

        • Sal says:

          ChatGPT might be helpful for someone who needs to write an article or report, but if I am just looking for information I think I would find it easier to use Google and go directly to surces and Web sites that I think are reliable rather than look through everything ChatGPT comes up with. However, if AI had a way to evaluate and rank how reliable, unbiased, and current its sources are, that would be a step in the right direction but that starts to become a bit subjective.

  9. Alan Hyman says:

    Asked chat.openai.com/chat “should i sell my Isavings bonds”

    Robot Answer ….Tax implications: Selling your Isavings Bonds can trigger tax consequences. Depending on how long you’ve held the bonds and your tax bracket, you may owe taxes on the interest earned or capital gains…

  10. What a cool idea David! I recently read alot about Bing and ChatGPT. This was an enlightening way to demonstrate the capabilities and flaws of those technologies. Thank you for the illustration and insights.

  11. Paul R. says:

    “TIPS are currently offering attractive real yields across all maturities, ranging from 1.60% to 1.80% (wrong; current range is 1.45% to 1.55%).”

    Sources and timing matter. Do the AI’s figures and your response refer to primary auctions or secondary market on a particular date? The hot link that was included in the above quote references your Q&A on TIPs page, which does state a YTM close to or above 1.60%. The replies on that page include figures around 1.80%.

    I was looking at 912828ZJ2 a couple days ago listed with a YTM of 1.957% on secondary.

    But, yes, some of the other issues you flagged are very puzzling. Overall your articles are by far the more convincing to me. TY!

    • Tipswatch says:

      I agree that Bing is probably looking at articles instead of specific data and that range of 1.60% to 1.80% was from some time in the past. It quoted core inflation at 6.0%, which was correct for November, but not January. I have NO IDEA where it came up with the goofball variable rate of 9.54% for the I Bond, a number that has never existed as an I Bond variable rate.

  12. Len says:

    Anyone too impressed with the alleged abilities of AI should consider reading The Chinese Room Argument, an essay by philosophy professor John Searle.
    Processing information is not thinking, as he demonstrates.

  13. Don says:

    Since these are trained on a database for up to a year and are not dynamic, anything that can change fast like interest rates will be behind the curve. Its 100% correct using the old data being trained on. Of course dates would be nice but the internet does not much care about dates anymore!

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