But the "this time it's different" crowd can be right for quite a long time. This low long-term interest rate environment has been "different" from the norm for quite some time.
Real inflation is probably twice CPI. It's in the U.S. Government's best interest to inflate away the debt and to shorten the budget deficit. However it's also important for the U.S. government for inflation to remain low. By tinkering with the CPI numbers, both can be done.
The latest inflation data PPI&CPI will force the hand of the Fed and it will raise rates later this month. Their main job is to fight inflation, if they give in to political pressure for the sleazy politicians it could mean even more trouble as international countries with all the money might start to liquidate their US holdings, that would be a nightmare.
Highlights August's PPI showed pressures but less than expected. The overall index, expected to jump 0.7%, rose 0.6% but the core rate, seen up a tenth, was unchanged. Excluding energy, producer prices actually dipped a tenth. But year-on-year rates are running hot, up 5.1% overall and up 2.4% for the core, the latter down 4 tenths from July but still above the 2.0% area that Federal Reserve officials keep their eye on. Energy prices jumped 3.7% in the month, adding to July's 4.4% jump. Gasoline was up 9.5%. Further gains are now underway. These numbers remember are month-to-month changes! On the plus side, auto prices reversed July's jump falling 1.3% while communications equipment slipped 0.3%. Today's data are pre-Katrina but are still important. Bonds firmed following release of the data, that included at 8:30 a.m. ET a smaller-than-expected July trade gap. Price pressures were evident going into the hurricane shock. New increases in fuel and food, along with supply chain snags following the storm, point to even further price pressures ahead. Another jump in Thursday's CPI is expected, and today's PPI won't change expectations.
This next report will be fed friendly, some will call for the fed to back off inflation has eased. Crude has fallen, but metals (copper) is making new highs.
actually imo this will be the first report that will show a higher core number then the previous months --- just my guess.