Its Inflation Stupid as Wall Street celebrates

April 20, 2007
Its Inflation Stupid as Wall Street celebrates

Ding Dong the Witch isn't Dead - With this week's release of an apparently benign CPI report, Wall Street resembled Munchkin Land celebrating the death of the Wicked Witch of Inflation. Amidst the revelry few spared much concern that the Index actually registered a monthly gain of .6%. Since such a rise equates to an annualized inflation rate of 7.5%, how could the Wall Street Lollipop Guild be so euphoric? Simple; to pronounce the Witch sincerely dead, one needs only to consistently strip out marginally needed items such as food and energy. Without these "distractions" the core CPI increase can be shown to be only .1%: "way" below the .2% that had been forecast.

In the face of what was in reality a horrific March CPI report, Wall Street once again demonstrated its ability to spin economic straw into gold. The trick to making a 7.5% annualized inflation rate disappear is simply to misdirect attention towards meaningless monthly core numbers instead.