CPI delivers a positive surprise

The March Consumer Price Index hit the tape earlier this morning. For a change, this inflation report was tamer than expected. While the overall CPI rose 0.6%, the "core" CPI gained just 0.1% (expectations called for a 0.2% rise). The year-over-year rate of core inflation cooled to 2.5% from 2.7%.

If you look at the meat of the figures, you see that medical care turned in a smaller increase this month (0.1%) than we've seen for a while. Apparel prices were also down sharply (1%), while the recent string of large tobacco price increases came to an end (prices were up just 0.2% after rising 1% in February and 3.1% in January).

Of course, the ultimate question is whether the CPI will remain tame with pipeline inflation (intermediate and crude PPI) up, the dollar falling (the dollar index is down another 24 bps to 81.83 this morning), and energy prices on the rise once again.