Core consumer prices, excluding food and energy, rose 0.2% in July, while the core CPI annual growth rate accelerated to 2.4%, the Labor Department reported on Friday.
XWall Street expected the core CPI to rise 0.2% on the month and 2.3% from a year ago.
The overall CPI rose 0.2% on the month and 2.9% from a year ago, as expected. Higher costs for housing, used cars and trucks, new vehicles and airline fares contributed to the gain.
After the CPI data, the S&P 500 index, Dow Jones industrial average and Nasdaq 100 futures remained solidly lower on the stock market today, with the focus on a spike in the dollar to the highest level in more than a year amid fear of fallout from a Turkish currency crisis. The 10-year Treasury yield pared its decline to 2.90%.
The yield curve flattened, as long-term interest rates slipped more than short-term rates, pressuring bank stocks. Bank of America (BAC) and Dow Jones component JPMorgan Chase (JPM) were off 0.9% in premarket trading.
Why Is The Fed Raising Rates?
Don't expect big market reactions to incoming inflation data, now that core inflation is close to the Fed's 2% goal and central bankers see slim chance of a substantial acceleration from here. Yet that begs a question: If inflation isn't a worry and wage growth is stuck under 3%, why is the Fed so dead-set on keeping up its steady campaign of rate hikes? Yes, growth picked up notably in the second quarter, but that may be short-lived. If economic growth doesn't take a big haircut from the China trade war, then it will in the second half of 2019 as the boost from federal tax-cut and spending stimulus levels off.
Nevertheless, the Fed remains worried that financial excesses will result from interest rates that are too low, even if those excesses don't show up in higher inflation and wages.
Chicago Fed President Charles Evans said on Thursday that inflation isn't a real concern and won't be even if it continues to rise somewhat above 2%. "We don't have to win the war on inflation over again because we did that in a very difficult costly and arduous fashion in the eighties and into the nineties."
Yet he thinks the Fed will need to get rates to a restrictive level in 2019 or 2020 as the labor market overshoots full employment.
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The post Core CPI Inflation Picks Up But That Won't Bother Fed appeared first on Investor's Business Daily.
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