The Inflation Situation: The Consumer Price Index is Up Again!

If you love inflation, you’ll love this.  Consumer price inflation is running at twice the Federal Reserve’s target.

The CPI rose 0.5 percent in May.  Everywhere you turn in the mainstream media, you will see it reported that the annual inflation rate at 4.2 percent.  That is true enough if looking backwards is you objective, because that is the government’s numbers report for the last 12 month.  If, however, you care less about what inflation was last June or September or November, and care more about what it is doing right now, you must annualize May’s 0.5 percent increase.  In other words, what would the current rate of inflation produce over 12 months?

6.17 percent.

That is serious inflation.  That is higher than the rate of consumer price increases in August 1971, when President Nixon abandoned the gold standard and imposed wage and price controls.

The Producer Price Index is running even hotter.  In other words today’s wholesale prices—which will be tomorrow’s consumer prices—climbed 1.1 percent in May.  Stated differently,the May PPI inflation rate annualizes to over 16 percent.

Much of the inflation surge comes from a 3.9 percent jump in energy prices, putting the 12-month increase at 23 percent.  Since energy is a component of everything else—manufacturing, agriculture, transportation—higher energy prices spread throughout the economy over time.  This justifies our annualizing current inflation rates rather than focusing on the inflation of months gone by.

As 2026 began many market participants were assuming or hoping (against massive evidence of its unlikelihood) that the Fed would be cutting interest rates this year.  That prospect has blinkered out with these higher inflation number.

As a consequence, we have seen paper gold and silver instruments, shares, and ETFs sell off (along with other investment vehicles) in the interim.  As we have seen over the past century, the CPI moving above 4 percent is a reliable harbinger of lower stock prices.   

Experienced precious metals investors have learned to take advantage of corrections driven by Wall Street.  Remember that inflation ultimately drives precious metals higher.  And US inflation will continue to drive global de-dollarization.