Core Inflation Rate Falls to 1.4 Percent if Shelter is Excluded

The Fed rate hike gang got excited yesterday about the release of the June Consumer Price Index data. As the NYT reported, a 0.2 percent June rise in the core CPI took the year over year rate to 2.3 percent. That is slightly above the 2.0 percent target set by the Fed, although the Fed uses the core personal consumption expenditure index, which shows a 1.6 percent advance over the last year.

However even the CPI figure can be a bit deceiving. The shelter component (essentially rent and owners...