Hold the Inflation Champagne

Wall Street and Washington are so eager to claim victory over inflation that even an acceleration in prices these days is deemed to be another step toward stable prices. Or so it seemed Tuesday, as Wall Street and various market sages shrugged off news that the consumer-price index for February rose at a faster pace for the second month in a row.

The CPI for all prices rose 0.4% in the month, up from 0.3% in January after months of slower increases. This means the inflation pace for the last three months at an annual rate is faster than for the last 12 months.

The core inflation rate, sans food and energy, rose at 0.4% for the second month in a row, or 3.8% for the last 12 months. That’s in the opposite direction of where the Federal Reserve wants prices to go as it attempts to return to its 2% annual inflation target.

Investors shrugged off the report, as if they continue to expect the Fed to cut interest rates as early as June. Stock indexes rose, and former Boston Fed president Eric Rosengren reinforced the optimism that disinflation continues.

We hope that’s right, but putting the champagne back on ice may be the wiser course. The price acceleration coincides with evidence that monetary conditions aren’t as tight as Fed Chairman Jerome Powell has said.

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