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The U.S. Government reported earlier today that the Consumer Price Index (CPI) rose by 0.2% in January. That increase was in line with expectations, and followed an unchanged reading in December and a slight uptick of 0.1% in November. Over the last 12 months, the CPI has risen by 2.9%. That is somewhat greater than we had seen in most 12 month periods in recent years, but it is still not a worrisome increase, overall, given the sharp escalation in one key component, energy costs, over the past year.

Meanwhile, the index for energy products soared by 6.1% over the past 12 months, while the index for food rose by a hefty 4.4%. The index for all items, less food and energy products, was up 2.3% during the past year. That so-called core inflation rate was just above the Federal Reserve's mandate for price stability and, as such, does not seem likely to engender a shift in central bank monetary policies anytime soon.

As for other categories, we saw food costs rise by 0.2% last month. Energy prices, which had fallen in December, also rose by just 0.2% last month, keeping the core CPI reading, which excludes the volatile food and energy components from the mix, at an increase of just 0.2%.

Other categories of note last month included gasoline prices, which increased by 0.9%. Here is the big energy problem, with some pundits predicting that a gallon of gasoline could soar to $5.50 by the early summer. Meanwhile, apparel prices also jumped up by 0.9% last month, and costs of medical care commodities increased by 0.6%. The cost of medical care services, however, rose by just 0.2% in January, half the December advance. This latter component has traditionally been a big inflation problem. Hopefully, this latest deceleration can last.

Overall, the report was reasonable, and while we may well have an inflation problem down the road following years of non-stop fiscal and monetary stimulus, that potential problem is not yet at hand. In other words, we do not think this latest report is a game changer in any way.