Inflation's Not So Scary After All

Yesterday, markets were startled by an unexpectedly high core PPI report (see our last post). So, we held our breath waiting for more bad news from the CPI report today.

It didn't happen. In fact, the CPI actually fell more than expected thanks to gas prices. And the core CPI (excluding gas and food) rose 0.2% as expected.

So, what do we make of these numbers? While the core rate is still above the Fed's "comfort level" it doesn't look to us like there is a big risk of acceleration of the core rate of inflation. And as a result, we suspect the Fed will stand pat for awhile longer - good news for equity investors.