CPI 2.7% YOY To December, Core CPI 1.8% YOY, Consumer Inflation Flat (charts, data downloads)

The US Consumer Price Index, which measures inflation at the consumer level of the economy, was little changed at 0.1% in December and 2.7% year-over-year through December. Excluding volatile oil and food costs from the readings, “Core” CPI for December was 0.1% and 1.8% YOY through December. You can automatically create charts and download historical CPI data by clicking here or scrolling down to our Data section on the right side of the site.

Consumer inflation is within the Fed’s comfort zone of 1-2% and was in line with expectations and this will be confirmed at the business level with next Wednesdays Producer Price Index report for December. If you click on the ‘All CPI, Month’ link in our Data section, it will display a chart at the top of the section where you can see how the volatility of food and especially energy prices causes inflation swings month to month. When this happens traders react accordingly. Rates are tied to bond trading and bonds rally on low inflation news, so today mortgage bonds are higher on the CPI news, which is helping rates drop.

In a longer-term sense, many market participants feel inflation is the ultimate effect of massive government stimulus. Conversely, market traders think inflation shouldn’t be an issue for some time because aggregate demand is compromised by weakened consumers and businesses. Meanwhile the bond markets and rates see-saw wildly as these two schools of thought battle each other in market trading daily, weekly, monthly. Oil price volatility is the key driver this year.