The core consumer price index (CPI) is a measure of inflation that excludes volatile components of food and energy prices. The term “M/M” refers to the change in the index from month to month, indicating the percentage change in prices from month to month.
The core consumer price index M/M is calculated by comparing the core CPI for the current month with the underlying CPI of the previous month and expressing the difference as a percentage. It provides a more accurate picture of underlying inflation trends by excluding the effects of temporary fluctuations in food and energy prices, which can be affected by factors such as weather conditions and geopolitical events.
Monitoring the core consumer price index (M/M) is important for policymakers, economists, and investors because it helps assess underlying inflationary pressures in the economy. It provides insight into whether prices rise or fall over short-term periods and helps measure how effective monetary policy is in managing inflation.
A positive core consumer price index M/M indicates an increase in prices, while a negative reading indicates a decline. The magnitude of the change reflects the pace of inflationary pressures. Higher-than-expected core CPI figures may lead to concerns about rising inflation, which could affect central banks’ decisions on interest rates and other monetary policy measures.
It is important to note that the core consumer price index M/M is just one component of the broader consumer price index, which includes all goods and services. Other differences in the CPI, such as the headline CPI, include food and energy prices. As a result, the core CPI (month/month) provides a more focused view of underlying inflation trends without the influence of volatile components.
US Consumer Price Index January
Consumer price growth accelerated again, with headline numbers rising faster than economists had expected. The CPI rose 0.3% from the previous month, up from December, while it rose 3.1% year-on-year, down slightly from December’s 3.4%. The core price gauge – which excludes energy and food – remained at a growth rate of 3.9% from the previous year.
This increase was led by categories that economists and markets expected to begin to decline: the costs of shelter and other services. Shelter was the single largest contributor to inflation in January, and items including medical care and transportation services also rose. The gains were wide-ranging across services.
Another measure of concern was the Super measure of the consumer price index, which is closely watched by the Fed and includes the costs of basic services minus housing costs. That showed an acceleration from the previous year to the fastest pace since May. On a monthly basis, prices rose at their fastest pace since April 2022.
Needless to say, this report was dampening market expectations for a rate cut. But Fed officials were warning that they needed to see more evidence of a sustainable trend toward the 2% inflation target (and this report certainly showed the opposite). While there will be another CPI report and several other key readings ahead of the next Fed meeting, this data shows that the battle against inflation is far from over.
Treasury bonds fell as traders delayed their estimates of the start date of the federal interest rate cuts. The swap contracts shifted the first full pricing to cut the interest rate to July from June. Two-year yields increased by 12 basis points by 4.59%. Stock futures fell, with the S&P 500 down 1.4%. The dollar jumped against all major currencies, surpassing the 150-yen level.
Report: CPI rises in April
Data from the U.S. Bureau of Labor Statistics showed that the consumer price index for all urban consumers (CPI-U) rose 0.3 percent in April, compared to the previous month, after rising 0.4 percent in March. Over the past twelve months, the index has risen 3.4 percent ahead of the seasonal adjustment..
The shelter index and the gasoline index rose in April, contributing more than seventy percent of the monthly increase in the index of all items. In contrast, the food index was unchanged in April, as the home food index fell by 0.2 percent, while the food outside home index increased by 0.3 percent..
Except for food and energy, the all-item index rose 0.3 percent in April, after rising 0.4 percent in the previous three months. Indicators that rose in April include shelter, vehicle insurance, medical care, clothing and personal care. Indexes of used cars, trucks, home furnishings, operations and new vehicles decreased during the month..
Overall, the all-item index rose 3.4 percent in the twelve months to April, a smaller increase than the 3.5 percent increase recorded in the twelve months ending in March. The index of all items except food and energy has risen by 3.6 percent over the past twelve months. As for the energy category, it rose 2.6 percent over the twelve months ending in April, while the food index rose 2.2 percent over the past year.
The market is pricing interest rate cuts of 50 basis points this year and USDJPY is trading at 155.26 with EURUSD at 1.0854.
