Blogs & Comment

Deflation coming in CPI

The Bank Credit Analystadvisory recently recommended avoiding, or going short, U.S. inflation-protected bonds because they expect the U.S. consumer price index to register deflationby 2011. The U.S. annual core inflation rate has been stuck at 0.9% since April, but should soon break down, warns BCA.
Core inflation has been propped up by tobacco taxes plus the strong market for used cars and trucks. But inflation in the shelter component (32%) of the CPI is expected to remain in negative territory for some time because the housing market is such a mess with plenty of excess supply. There is a high chance of a temporary bout of outright deflation in the core CPI measure in 2011, concludes BCA.
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