RECEDING RATE

While the Fed’s favorite inflation measure came in at 0.2% for December (the unrounded number was 0.156%), the six-month rate is running at 2.3%, and the three-month at 2.2%, very close to the Fed’s 2% target. Better yet, while labor compensation was up 0.9% Q-o-Q, and 3.8% Y-o-Y, with productivity growing at about 2%, compensation minus productivity, the underlying inflation rate, is up a benign 1.8%! Inflation continues to soften.