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Consumer Price Index Unexpectedly Falls in April

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The government released the April CPI numbers this morning, and to the surprise of many, the CPI went down in April. Excerpts from the government's news release:

On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the index increased 2.2 percent before seasonal adjustment. The index for energy decreased 1.4 percent in April and accounted for the seasonally adjusted decline in the all items index. The indexes for gasoline and natural gas both decreased significantly, outweighing increases in the indexes for fuel oil and electricity. The food index increased 0.2 percent in April, while the index for all items less food and energy was unchanged.

According to Bloomberg

The cost of living in the U.S. unexpectedly dropped in April for the first time in more than a year, signaling the world’s largest economy is recovering without causing prices to flare.

Economists surveyed by Bloomberg had expected a CPI increase of 0.1%. Also mentioned in the Bloomberg article is that the "debt crisis in Greece that has weighed on the value of the euro may keep damping U.S. inflation in coming months."

I'm afraid this gives the Fed more leeway to delay hiking rates.

As of this morning, the Fed funds futures show an implied probability of a rate hike on or before the Fed's December 14th meeting at 43%. This fell by 3% in the last 90 minutes.



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Comments
6 Comments.
Comment #1 by Anonymous posted on
Anonymous
And we are suppose to believe this report. Oh, yes I forgot, Bernanke believes in Santa Claus too.

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Comment #2 by Anonymous posted on
Anonymous
If the interest rates go up by only a 1%, it will cost US Government about $100 billions per year.
Everyone at the FEDs are petrified of even mentioning the rise in interest rates.
We are in a stalemate situation and nobody dare touch the rates from this level.
That is why, we hear untrue statements month after month year after year.
I, for one do not expect interest rates rise until someone in Congress has guts to expose the scheme and lies perpetrated on the American people.

10
Comment #3 by Anonymous posted on
Anonymous
Well said Anonymous - #2, I agree with your point of view.

3
Comment #9 by NO stock 4 me kramer (anonymous) posted on
NO stock 4 me kramer
Sounds about right #1

its been like this all along with these CPI figure jugglers. Besides I think the figure "down" was like 0.01%, wow weee, kinda like the CNBC stock crowd going nuts about a "rally" when the market falls 500 points and goes back up 50. But I'm sure it made Uncle Ben's day, so he can say "for an extended time" yet again.

I'm still riding this wave, I still have till Oct 2011 to go on one of my CD's still getting 6%, maybe by than things will have changed, or everybody's money is on a roll in the bathroom. As for any new CD's I pretty much am resigned to the "competitive" 1%.

I dono, but I seen rates a lot higher even when the market was at 5000.

 

2
Comment #10 by Anonymous posted on
Anonymous
For now, the biggest losers are savers. The average yield on a one-year certificate of deposit has sunk to 0.7 percent, according to Bankrate.com. That's the lowest it's been since Bankrate starting tracking the figure in 1983.

The United States has not had to battle deflation since the 1930s.

Core inflation, which excludes volatile food and energy prices, was flat in April. Over the past 12 months, it has risen just 0.9 percent -- the smallest increase in 44 years.

Paul Ashworth, senior U.S. economist at Capital Economics, said he thinks the Fed won't start raising rates until late next year -- and possibly not until 2012.

With high unemployment and lower prices, I would expect to see rates approach 0%.

6
Comment #12 by Anonymous posted on
Anonymous
The CPI did NOT go down.  CPI-U was 217.631 last month and it's 218.009 this month.  This is the number that Series I Savings Bond returns use.

The "seasonal adjustment" is what created the apparent negative inflation.  Read the first paragraph of the monthly press release again.  One sentence uses seasonal adjustment and the other does not.  Total

nonsense.

"On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the index increased 2.2 percent before seasonal adjustment."

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