The market apparently liked today's report on consumer inflation in February, but if you feel any affection for the median CPI as a measure of core inflation, things are not as rosy as the reported numbers suggest.  From the Cleveland Fed:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.5% annualized rate) in February. The median CPI is a measure of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.       

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (0.6% annualized rate) in January. The CPI less food and energy rose 0.1% (1.8% annualized rate) on a seasonally adjusted basis.       

Over the last 12 months, the median CPI rose 2.5%, the CPI 3.6%, and the CPI less food and energy 2.1%.

The summary table:


Table_1

 

A look at the distribution of individual price changes (weighted by expenditure shares) reveals why the median is giving a less benign signal than the average.  Here's how things looked in January...


January_cpi_1


 

... and here is how they looked in February:


 

February_cpi


So, while there has been a noticeable shift away from very high rates of change toward very low rates of change, there has also been a large shift from the moderate 2-3 percent range to the less moderate 3-4 range.  Personally, I'm not feeling a lot of love for this picture.

With thanks to Linsey Molloy, the data above, and more, if you are interested:
Download Histogram_0603.ppt
Download Histogram_0603.swf