Inflation is Still Low

This morning we got the CPI numbers for July, and they show that inflation is still quite low. Both the headline and core rate rose by 0.1% last month. In the last year, both headline and core are up 1.7%.

Here’s a look at the monthly seasonally-adjust core rates going back a few years:

The decline during March was a clear outlier but the four following months haven’t seen much an in uptick.

Here’s the real Fed funds rate based off core inflation:

I think this chart says a lot. You can see that even when the Fed does nothing, it’s tightening because inflation is getting softer.