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US inflation remains moderately painful [ClearOnMoney]
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US inflation remains moderately painful

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Commentary

US inflation remains moderately painful

19 Jan 2012 by Jim Fickett.

US core inflation, as of December, stood at 2.2%, the same as in November. This is not high inflation, by any stretch. It is nonetheless painful, given that short-term interest rates are approximately zero, so that savings are not growing to keep up with inflation.

That investors remain concerned about high inflation in the longer term is shown by negative yields on TIPS:

Investors bought inflation-protected Treasury securities at a negative interest rate for the first time on Thursday, demonstrating the depth of concerns that Federal Reserve efforts to stimulate the economy could lead to higher inflation in the future.

The $15bn in Treasury Inflation Protected Securities, or Tips, were sold at a negative yield of about 0.046 per cent.

According to Bloomberg, the closing yield today on 5-year TIPS was -1.03%, and for 10-year TIPS, -0.18%. On the other hand, you will quickly get rich (NOT!) on the real yield of 0.73% on 30-year TIPS. Investors are desperate indeed, with Bernanke at the helm.