Is inflation approaching a crisis—or could it be peaking? Commonwealth CIO Brad McMillan examines the details of the latest Consumer Price Index.
The latest inflation data is in, revealing that the Consumer Price Index (CPI) is up sharply once again. On the face of it, it seems inflation could be approaching a crisis: the headline index was up by 1.2 percent for the month and by 8.5 percent for the year (a 40-year high). If inflation keeps rising, that would be a bigger problem than the one we already see. Fortunately, there is reason to believe inflation may be peaking. That’s not to say that prices will necessarily come down—although there are signs that is happening. Rather, the trends that have driven prices up so high and so fast are moderating and, in some cases, reversing. Let’s take a look at the details. CPI Pop Due to Price of Energy In the latest report, that 1.2 percent gain looks huge. But when you look at the data, on balance, it was caused by one thing: the price of energy. Gas prices were up by 18 percent last month, according to Capital Economics, which drove the energy component of CPI up by 11 percent. When accounting for the weighting of energy, it drove the CPI as a whole up by 1.
