The U.S. Department of Labor reported the inflation numbers for May today. Before seasonal adjustments, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.84% in May over April and was 4.18% higher than May 2007. Core CPI (CPI less food and energy) before seasonal adjustments was up by 0.06% compared to April and up 2.31% compared to a year ago. Seasonally adjusted, CPI-U rose 0.65% over April versus expectations of 0.5% and core CPI rose 0.20% the same as expected. "Not a bad number if you don't drive," quipped Meny Grauman, an economist for CIBC World Markets.
The Fed is starting to talk tough on inflation. Earlier this week, Fed chief Ben Bernanke said "The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations." He also said that the Fed would "strongly resist an erosion of longer-term inflation expectations." The Fed is facing a dilemma; inflation is poking its ugly head and the economy is running at a slow pace. Inflation has yet to rise in the core numbers, but inflation is making its presence felt.
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