Consumer Price Index: March Core at 2.09%

The Bureau of Labor Statistics released the March Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 1.54%, down from 2.33% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.09%, down from 2.36% the previous month and above the Fed's 2% PCE target.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.4 percent in March on a seasonally adjusted basis, the largest monthly decline since January 2015, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.5 percent before seasonal adjustment.

A sharp decline in the gasoline index was a major cause of the monthly decrease in the seasonally adjusted all items index, with decreases in the indexes for airline fares, lodging away from home, and apparel also contributing. The energy index fell 5.8 percent as the gasoline index decreased 10.5 percent. The food index rose in March, increasing 0.3 percent as the food at home index rose 0.5 percent.

The index for all items less food and energy fell 0.1 percent in March, its first monthly decline since January 2010. Along with the indexes for airline fares, lodging away from home, and apparel, the index for new vehicles declined in March. The index for shelter was unchanged, with increases in the indexes for rent and for owners’ equivalent rent offsetting the aforementioned decline in the index for lodging away from home. Indexes that increased in March include medical care, used cars and trucks, motor vehicle insurance, and education.

The all items index increased 1.5 percent for the 12 months ending March, a notably smaller increase than the 2.3-percent increase for the period ending February. The index for all items less food and energy rose 2.1 percent over the last 12 months. The food index rose 1.9 percent over the last 12 months, while the energy index declined 5.7 percent. [More…]

Investing.com was looking for a -0.3% MoM change in seasonally adjusted Headline CPI and a 0.1% in Core CPI. Year-over-year forecasts were 1.6% for Headline and 2.3% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

 

The next chart shows both series since 1957, the year the government first began tracking Core Inflation.

 

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is now at the PCE target range of 2 percent.