Fed Nightmare: Core Inflation Rising, Financial Markets Crashing

CNBC: US Consumer Price Index down 0.1% in Dec vs flat reading expected
The Labor Department said on Wednesday its Consumer Price Index slipped 0.1 percent after being unchanged in November. Despite the drop last month, the CPI increased 0.7 percent in the 12 months through December, the biggest increase in a year.

The rise followed a 0.5 percent gain in November. The year-over-year inflation rate is rising as the oil price-driven weak readings in 2015 drop out of the calculation. The boost from the so-called base effects could, however, be limited by lower oil prices, which are near 12-year lows.

...The so-called core CPI, which strips out food and energy costs, edged up 0.1 percent after rising 0.2 percent for three straight months. In the 12 months through December, the core CPI rose 2.1 percent, the largest gain since July 2012, after climbing 2.0 percent in November.
The Fed wants inflation in a range from 2% to 3%. With oil prices plummeting and a strong U.S. dollar, core inflation is already at the bottom of the range. Most important component? Housing, coming in at about one-third of the CPI. It increased 3.2% in 2015. And then there's the joke of medical care under the "Affordable" Care Act, which can, in some cases, run almost as high as shelter as a percentage of income. Deflation is unfolding in the financial markets and should spread into prices eventually, but at the same time, for those betting on a rosier scenario, the only thing missing for an inflation shock is rising oil prices.

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