Merrill: Core CPI Has Peaked

Is it time to stop worrying about inflation in the U.S.? Merrill Lynch & Co. believes it is.

The New York-financial firm believes the core Consumer Price Index -- the CPI minus price changes for food and fuel -- peaked this past March at an annual year-over-year rate of 2.4%, the lowest peak-of-cycle figure since the early 1960s. "The fact is that since oil prices made a sustained break above $35 per barrel in early 2004, the pass-through effect on other goods and services has been minimal," asserts Merrill.

"It seems to us that the lingering generalized fear of inflation that both investors and the Fed [Federal Reserve] share is reminiscent of he bogeyman of childhood lore -- a frightful being that no one has actually seen, but all fear," says Kathleen Bostjancic, a very real economist at Merrill.

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