Core Prices Flat, Headline Inflation Falling

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I understand the social psychology behind it but there’s something hilarious about the idea of a hard-money anti-inflation zealot like Rand Paul suddenly gaining political momentum at a time when, as Annie Lowrey observes, there’s actually no inflation whatsoever happening:

Fed governors and market gurus have been warning about the threat of inflation to the United States economy — but there remains no sign of prices rising at worrying rates. Indeed, this morning, the Bureau of Labor Statistics reported a slight deflation in the price of consumer goods in April — a decline of 0.1 percent. Over the past year, the Consumer Price Index has increased 2.2 percent.

The single-month downturn does not signal that the United States is in for a troubling period of deflation. It is due to a drop in energy commodity prices, particularly a 2.4 percent decline in the cost of gasoline. Most other prices, for things like food and cars, drifted slightly upward. Core CPI — a better measure of underlying inflation — did not budge in April. Year-over-year, it is 0.9 percent, the lowest rate since 1966.

The core number matters more than the headline number, and the point is less about the one month number than the longer-term trend toward near-zero inflation. If I were on the FOMC, I would be saying to not worry about inflation until the price level catches up with the pre-crisis trend.