US inflation has been accelerating throughout 2011 with the YoY growth in total CPI reaching 3.6% in June. And while core CPI is only up 1.6% YoY in June, it has jumped 2.9% during the last 3 months.



(charts from Cleveland Fed)

Some indicators are suggesting that both headline and core inflation are tapering off:

  • The MIT BPP Index, which measures online prices on a daily basis, has remained fairly stable in June after rapid gains during the first 5 months. Monthly gains in the BPP have declined from  +0.7% in February-March to 0.4-0.5% in April-May and to 0.2% in June.

  • Crude oil and gasoline prices have also been more stable since May:

  • Many commodity prices have peaked or even declined in recent months. Wheat and cotton prices, in particular, have declined significantly lately.




Good news on the inflation front would be welcomed.

  1. The earnings season is off to a good start and PE multiples would benefit from tamer inflation trends.
  2. Bernanke & Co. would realize that higher inflation is not a big threat for now and would be more inclined to consider other monetary measures to prop up the economy.


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