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Benign inflation report

By Holden Lewis ·
Friday, April 15, 2011
Posted: 9 am ET

Overall inflation was about the same as expected in March. When you ignore fuel and food, inflation was lower than expected. Mortgage bond yields are down this morning, and that should keep a lid on mortgage rates today. I'm not saying mortgage rates will fall, but this Consumer Price Index report won't make them rise.

Overall consumer prices rose 0.5 percent in March, which is in line with the expectations of experts polled by Core consumer prices -- everything but fuel and food -- went up 0.1 percent. The consensus prediction of experts polled by was twice that -- they forecast a rise of 0.2 percent.

In the last 12 months, overall prices have gone up 2.7 percent. But when you ignore food and energy, prices have risen 1.2 percent. That's low enough for the Fed to keep the federal funds rate at 0 percent indefinitely.

Gasoline prices have risen 27.5 percent in 12 months, according to the Labor Department. That's a lot, but consumers can limit the impact on their pocketbooks by changing their behavior. The local paper has an article today describing how demand for hybrid vehicles has soared in the last couple of months.

I'm not convinced by the scaremongers who say today's inflation will eventually cause a rise in interest rates. And my equanimity about prices is confirmed by the low core consumer inflation rate.

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