April 2018 Consumer Price Index

Prices increased in April 2018 for Americans according to the Bureau of Labor Statistics.  Their Consumer Price Index (CPI) rose 0.2 percent to start the second quarter.  This uptick followed March’s downward move of minus 0.1 percent.  Year-over-year, this headline tally accelerated to 2.5 percent from 2.4 percent.  Removing food and energy, core-CPI added 0.1 percent for the month after an increase of 0.2 percent, and this measure rose 2.1 percent versus a year ago, matching the prior count.

Components in the indicator were mixed.  Both new and used vehicles were cheaper in the period, falling 0.5 percent and 1.6 percent respectively, and they each declined versus a year ago.  Medical care commodities dropped 0.2 percent, but medical care services increased 0.2 percent.  Costs for clothing increased, but transportation services fell.  Energy commodities (think gasoline and fuel oil) jumped higher, but energy services (electricity and gas) declined. 

After remaining below 2.0 percent for a year, core-CPI stayed above this level for a second consecutive month in April.  While this is not the Federal Reserve’s favorite price proxy, it does move with some correlation to their preferred measure.  But before the hawks in the Eccles Building begin screeching, they’ll have to reconcile with the fact that core-CPI spent considerable time above two on a year-over-year basis from late 2015 through early 2017.  Early indications from the central bank suggest they are willing to let the inflation level run a little faster than their explicit 2.0 percent target since it has spent most of the current expansion below their arbitrary mark.  This iteration of CPI is unlikely to change the Federal Reserve’s monetary policy course.