Wednesday, March 21, 2012

Today's Reports on Inflation, Inflation Expectations

Highlights from today's reports on inflation:

1. The BLS reported an annual inflation rate of 2.9% through February, matching the rate from January. The annual core inflation rate was 2.2%, slightly lower than the 2.3% rate in January.

2. Gasoline prices rose by 6% for the month of February and by 12.6% over the last year. Partly offsetting those increases were decreases in natural gas prices: -3.4% for the month, and -9.8% for the last year.

3. The Cleveland Fed's median CPI inflation increased by 2.3% over the year, down slightly from 2.4% in January.

4. The Cleveland Fed also reported that its latest estimate of 10-year expected inflation is 1.38%, up just slightly from 1.34% last month (see chart above). The Cleveland Fed provides monthly estimates of expected inflation over time horizons from 1 to 30 years, see its methodology here. Over the next year, inflation expectations are 1.2% and over the next 30 years only 1.95%.

Bottom Line: Except for gasoline prices, there don't appear to be any widespread inflationary pressures building in the economy, and expectations of future inflation according to the Cleveland Fed's model are falling.