Skip to main content

Core CPI Jumps the Most Since 1991 Yet Little Bond Market Reaction

Economists underestimated year-over-year measures of inflation. The Bond market didn't.
  • Author:
  • Publish date:
CPI Year-Over-Year Percent Change NSA 2021-06

The BLS reports CPI for all Items Rises 0.9% in June as many indexes increase.

  • The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9 percent in June on a seasonally adjusted basis after rising 0.6 percent in May.
  • This was the largest 1-month change since June 2008 when the index rose 1.0 percent. 
  • The index for used cars and trucks continued to rise sharply, increasing 10.5 percent in June. This increase accounted for more than one-third of the seasonally adjusted all items increase. 
  • The food index increased 0.8 percent in June, a larger increase than the 0.4-percent increase reported for May. 
  • The energy index increased 1.5 percent in June, with the gasoline index rising 2.5 percent over the month.

  • The index for all items less food and energy rose 0.9 percent in June after increasing 0.7 percent in May.

  • Owners' Equivalent Rent (OER) rose 0.3% following a 0.3% rise in May.


  • Over the last 12 months, the all items index increased 5.4 percent before seasonal adjustment; this was the largest 12-month increase since a 5.4-percent increase for the period ending August 2008.
  • The all items index has been trending up every month since January, when the 12-month change was 1.4 percent.
  • The index for all items less food and energy rose 4.5 percent over the last 12-months, the largest 12-month increase since the period ending November 1991. 
  • The energy index rose 24.5 percent over the last 12-months, and the food index increased 2.4 percent. 
  • Owners' Equivalent Rent (OER) rose 2.3% from a year ago.

Econoday Economist Expectations

  • The consensus opinion was for the CPI to rise 0.5% month-over-month vs. the reported 0.9%
  • The consensus opinion was for the Core CPI to rise 0.5% month-over-month vs. the reported 0.9%
  • The consensus opinion was for the CPI to rise 5.0% year-over-year vs. the reported 5.4%
  • The consensus opinion was for the Core CPI to rise 4.0% year-over-year vs. the reported 4.5%

Last Night Tweets

Bond Market Reaction

I would have reported that Tweet after the report regardless. 

The initial reaction was indeed lower despite huge and unexpected jumps. I see now that the yield on the Long Bond is up 2.7 basis points and the 10-year yield is up 3.2 basis points.

This is a mute reaction.

Owners' Equivalent Rent

Scroll to Continue


OER (bold bullet point above) is the largest component of the CPI with a weight of 24.263%.

It is a measure of what homes would rent for if homes were indeed rented. Home prices are not in the CPI.

Debatably, homes are not a consumer item. So what. Tell the person seeking to buy a home that shelter is only up 2.3% from a year ago.

The Fed and BLS are making a serious mistake, again, regarding inflation by ignoring housing prices. That mistake led to the 2007-2010 house price crash and the Great Recession.

Yet, even without a proper measure of housing, prices are up 5.4% from a year ago.

For now, the economy is running very hot. Bubbles abound. The Fed, a collection of groupthink economic illiterates, is pleased. Consumers aren't.

The Real CPI

The Real CPI is much greater than the reported Real CPI. I will re-estimate the Real CPI shortly, factoring in housing. 

Stay tuned.


Like these reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

If you have subscribed and do not get email alerts, please check your spam folder.