Consumer Price index, core vs headline

Rising rents and medical costs lifted underlying U.S. inflation in January by the most in nearly 4-1/2 years, signs of an uptick in price pressures that could allow the Federal Reserve to gradually raise interest rates this year.
The Labor Department said on Friday its Consumer Price Index, excluding the volatile food and energy components, increased 0.3 percent last month. That was the biggest gain since August 2011 and followed a 0.2 percent rise in December.
In the 12 months through January, the core CPI advanced 2.2 percent, the largest rise since June 2012. The CPI had increased 2.1 percent in December. The Fed has a 2 percent inflation target and monitors a price measure that is running well below the core CPI.

But,but...

The overall CPI was unchanged last month after slipping 0.1 percent in December. The CPI increased 1.4 percent in the 12 months through January, the biggest rise since October 2014, after gaining 0.7 percent in December.

The chart shows them price index not seasonally adjusted, monthly and semi-annually.  The index is flat, there is no consumer inflation.  Computed from 12 months ago, we get a 1.37%, but most of that occurred some three quarters ago.





OK, I take the headline inflation, subtract out the core inflation, and you have deflation MoM).   The rising medical costs are not consumer purchases, they are government mandated fees and taxes.  The housing costs are mostly driven by foreign rebalancing.  The picture here is distorted pricing, likely caused  by severe constraints on consumer spending.