June 15

6/15 – Last week’s CPI report was not pretty. The consumer price index for May was 4.2% above a year ago, up from 2.4% in February. Gasoline was (again) the big driver in May, up 40.5%, while fuel oil (home heating oil and the same distillate as diesel) is up 58.9%. Taking out the food and fuel categories, core CPI was up 2.9%. But even without fuel prices driving the index, core CPI is well above the Federal Reserve’s 2% target for keeping a wage-price spiral from accelerating and sinking the economy. The Fed now effectively has its hands tied regarding any thoughts of lowering interest rates. The 10-year treasury yield, which had dropped to below 4% in February, is 4.48% (6/12). Thirty-year fixed-rate mortgages have jumped from 5.98% to 6.52% (Freddie Mac national average) over the same period. Rates on credit cards, auto loans, consumer loans, commercial real estate loans, and corporate debt have also pushed higher.