Chart of the day: U.S. Consumer Price Index
I recently wrote a post about U.S. Treasury securities which have been rising in price as interest rates have come down. In the post, I called the Treasury rise a bubble and I stick by that moniker despite protests from some astute readers.
However, I do want to point out one reason why Treasurys are rising. Inflation.
Inflation is plummeting and that means inflation will soon become deflation. The U.S. Consumer Price Index (CPI) was released today, showing that inflation fell 1.9% in the last month alone. Prices are only 1.1% higher than last year at this time. In July that figure was 5.6%.
To be sure, much of that decline comes from the drop in oil prices – the energy index fell 17% in November. Nevertheless, this inflation report is a clear signal that prices are plummeting and that the Federal Reserve has been powerless to stop the fall.
Certainly, this is a very good reason why Treasury prices are rising.
Consumer Price Index Summary – Bureau of Labor Statistics