CPI Rises 0.4% In February, Fed Says Rises Temporary

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CPI Rises 0.4% In February, Fed Says Rises Temporary

The Bureau of Labour Statistics at the US Department of Labor announced its CPI (Consumer Price Index) for Februaury today. The new figure shows the index has risen by 0.4%. The increase in prices hasn’t come as much of a surprise to analysts. They had a consensus expectation of around 0.4% for this increase. January showed an increase of 0.2%. The rise is mainly blamed on higher gasoline prices as problems in the Middle East choke supply. Prices at the pumps have risen as have transport and energy costs for firms operating across the board.  The rise in gasoline prices is seen as more of a temporary problem than a structural one by most analysts. As Libya increases output and problems in the Middle East, particularly involving Iran and Syria, hopefully calm down prices should fall.

In recent times there has been much criticism of the manner in which these statistics are collected and presented. Many economists and consumers feel the CPI does not show the real rate of inflation but only a vague generalized proxy. Many families in the United States have their wages or social security payments pegged to the CPI index. Inaccuracy, particularly unreporting, in this measure hurts those families more than anyone else. The FMOC report released earlier in the week suggested that inflation would not be a problem in 2012. They expected the rate to stay below what is called an acceptable 2%. They also gave guidance that February’s increases would be a temporary bubble in CPI figures.

The CPI’s increase in January of 0.2% was the largest jump since 2008 leaving many worried about a sustained increase in inflation that may outpace the Fed’s recommendations. Some analysts see this as the beginning of a state of inflation in the US economy owing to the way it has been handled throughout the crisis and the Federal Reserve’s current monetary policy. They see the Fed’s assurances as platitudes and generally disagree with the use of CPI as a valid measurement technique. Inflation would be liable to play a key role in the Presidential election campaign were it to rise dramatically throughout the year. Already the high price of gas has become a political missile used against Barack Obama. A surge in prices could hamper the overall recovery in the economy, lessening consumer confidence and increasing volatility on the markets. Energy prices however dominate the increases in this number. A barrel of Brent crude rose by $10 in February.

Image via: Inkcinct Cartoons

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