Today’s CPI recorded 0.06% reduction in prices since last month, the first drop in prices in six months. The headlines from the major financial news houses were focused squarely on the price drop.
The Wall Street Journal: Consumer Prices Ease Amid Lower Fuel Costs
Financial Times: US consumer price index falls for first time in six months
You get the picture.
But whatever happened to the focus on core CPI? It seems whenever prices are rising, the Fed, government and media focus on Core CPI, while when volatility biases toward declines in prices, total CPI becomes the focus.
The reduction this month was mainly the result of falling prices for gasoline—not a Core CPI component. As you can see in the chart below, Core CPI actually increased by .12% compared to last month. Don’t doubt that the Fed will use falling prices to justify continued QE, even though Core CPI has been its focus anytime it wants to reassure the public it has prices under control.