Photo: AFP

As we warned yesterday, today’s US CPI number came in above expectations, with the headline number up 0.4% for August (vs. a consensus of 0.3%). The core CPI index year on year change was 1.7%, vs. a forecast of 1.6%, not enough to spook the US bond market, where the 10-year note was down just 1/4 of a percentage point.

With core inflation below the Fed’s 2% target, the market evidently doesn’t expect the Federal Reserve to do very much. The shelter component of the index moved up sharply, gaining 0.5% on the month, its biggest increase in a year, but that appears to be an artifact of measurement rather than a substantial change.