(Bloomberg) — U.S. consumer prices climbed in March by the most since 2012, adding to evidence of budding inflationary pressures as the economy reopens and demand strengthens.
The consumer price index increased 0.6% from the prior month after a 0.4% gain in February, according to Labor Department data Tuesday. A jump in the cost of gasoline accounted for almost half the overall March advance. The median estimate in a Bloomberg survey of economists called for a 0.5% rise.
Excluding volatile food and energy components, the so-called core CPI increased 0.3% from a month earlier, the most in seven months and reflecting rising rents and auto insurance.
CPI YoY rose 2.6% while CORE CPI YoY rose only 1.6%. Owners Equivalent Rent of Residences remains at 2% YoY.
Once again, lower and middle income households consumer larger proportions of food and energy in their budgets than high income households. Yet The Federal Reserves focuses on what impacts the higher-income households.
The Covid epidemic led to a slump in CORE inflation, but inflation has picked up since then. But not much.
It looks like Bitcoin is acting as an inflation hedge while gold has not.
If the Fed REALLY wanted inflation, all they have to do is revert to earlier methods of calculation. Then we would like to see a rush to gold and silver again.
Here is this AM reaction to the inflation report. Bitcoin surged overnight, but gold surged on the CPI report.
Random Length Lumber Futures are up 74% since Biden’s inauguration.
Of course, the CS Fear Barometer is falling thanks to massive Fed money printing and balance sheet expansion.
The CS Fear Barometer measures investor sentiment for 3-month investment horizons by pricing a zero-cost collar. The collar is implemented by the selling of a 10% OTM SPX call option and using the proceeds to buy an OTM put. The CSFB level represents how far out-of-the-money that SPX put is. The higher the level, the greater the fear.
The Biden epic spending spree and The Federal Reserve’s epic money printing has resulted in a host of outcomes. First, cryptocurrency Bitcoin finally hit $61,000 today before backing-off.
The massive increase in The Fed’s money printing (M2) has stimulated stock market growth (S&P500) along with cryptocurrencies Bitcoin and Ethereum. The out-of-control money printing has essentially killed-off stock market volatility (VIX).
Biden and Powell are Natural Born (Volatility) Killers.
In March, Fed Chair Powell told Congress that inflation risk remains low.
The Bureau of Labor Statistics this morning reported that US Producer Price Index Final Demand year-over-year rose a whopping 4.2%, the highest rate since 2011.
Producer prices (output) are a measure of the change in the price of goods as they leave their place of production (i.e. prices received by domestic producers for their outputs either on the domestic or foreign market).
Even without food, energy and trade, Final Demand Prices rose 3.1% year-over-year.
Of course there is going to be inflation with Biden’s multi-trillion spending spree and The Fed’s prodigious money printing.
Amazingly, The Federal Reserve keeps stoking the asset bubble with near zero interest rates. Despite the fact that the Taylor Rule (Rudebusch specification) is calling for a Fed Funds target rate of 2.66%.
Uber-dove Charles Evans, President of the Chicago Federal Reserve, is calling for more gas on the asset bubble fire with a TR estimate of -1.13 for the Fed Funds Target Rate.
M1 money stock is growing at a whopping 357% year-over-year as M1 velocity has collapsed to an anemic 1.22.
M2, a broader measure of money, is growing at 27.1% year-over-year with a dismal velocity of 1.135.
Since velocity equals GDP divided by money, The Federal Reserve had better hope that GDP does increase with the trillions that the Biden Administration is throwing at the problem. But since higher taxes won’t be realized for at least a year, there will be even more money printing.