Core CPI Above 3%
Underlying inflation pressure persists
Core CPI (All Items Less Food and Energy) above 3% represents persistent underlying inflation that cannot be dismissed as transitory energy or food price spikes. This was the regime from March 2021 through late 2024.
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
Headline CPI can spike on oil (which is transitory). Core CPI reflects demand-pull and wage-push inflation that requires policy response. The market trades on core, not headline.
At 3% core CPI, the Fed is at least 100bp above target. This guarantees hawkish rhetoric and removes the possibility of preemptive rate cuts even if growth slows.
Shelter (rent + owners' equivalent rent) is ~33% of CPI and lags market rents by 12 months. When asking rent growth peaked in mid-2022, it took until mid-2024 to flow into CPI. This lag creates a known future path for inflation.
Sticky core inflation rewards patience over reaction. Because shelter costs feed the index with a roughly 12-month lag, part of the disinflation path is knowable in advance — consider extending bond duration gradually along that path rather than all at once on a single encouraging print.