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Opinion
Jonathan Levin

Inflation Doves Want It Both Ways With Latest CPI Quirk

The improvement in October comes with a methodological asterisk that the markets are happy to overlook.

Price pressures have flitted from one product category to the next.

Price pressures have flitted from one product category to the next.

Photographer: Mario Tama/Getty Images

For much of the past year, interest rate doves have been eager to make excuses for inflation, blaming obscure methodological quirks in the US’s consumer price index for a stretch of concerning reports. Now, another of those peculiarities is pulling reported inflation down, but the doves are happy to look the other way.

While there were certainly positive developments to celebrate in Thursday’s CPI report, the optimists would do well to take a step back and temper their enthusiasm. The core CPI — which excludes volatile food and energy prices — rose 0.3% in October from the previous month, less than the 0.5% median forecast in a Bloomberg survey of economists. As a result, the yield on two-year Treasury notes tumbled 22 basis points, the most since June, while the Nasdaq 100 was poised for the biggest jump since April 2020. But using three months of data to adjust for volatility, the annualized pace is still running around 5.8%, far exceeding the Federal Reserve’s idea of stable prices.