Did we finally get that good break in the inflation news we've been waiting for?  From Reuters:

U.S. stocks gained on Wednesday as a tame increase in core consumer prices suggested that the Federal Reserve may choose to keep interest rates unchanged in the short term...

The core Consumer Price Index, excluding volatile food and energy prices, rose moderately in July and followed an unexpected drop in July core producer prices on Tuesday that sparked a rally in stocks. In another report, the pace of U.S. home building slowed more than expected in July.

Color me not quite impressed.  From the Cleveland Fed:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.4% (4.4% annualized rate) in July. 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.

In case you haven't been following along with the median, that 4.4% rate is definitely not progress. And another core measure in the spirit of the median -- the trimmed-mean CPI -- was equally bad:

   

Median_and_trimmed

   

What's going on here?  Unlike the traditional core inflation measure, which simply excludes food and energy componentsof the CPI index, the median and trimmed-mean measures exclude both high and low price changes, no matter what they might be.  The idea is to get a picture that is not distorted by items in the CPI market basket that are increasing by a lot, or decreasing by a lot.  And that picture just isn't improving that much:

   

June_july_histogram

   

While the weighted fraction of prices rising at an annual rate in excess of 5% fell, the fraction rising in excess of 3% actually went up.  And compared to the year as a whole, it is hard to feel too cheery about the pattern of price changes in July:

   

July_ytd_histogram 

   

This comes from the Wall Street Journal's sampling of business-economist's reactions to the CPI report: 

While the 0.2% outcome for the core represents a bit of a breather following four consecutive +0.3% readings, we see this as largely reflective of temporary factors as opposed to any underlying shift in the inflation story...-- Morgan Stanley Fixed Income Economics

I'd say the facts support that opinion.