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The inflation numbers for this month pushed the core rate up to 2.8% y/y. This pushes us well above what Bernanke and company would call contained. I just read in the Dismal Scientist that this number was good for us. How? Really? No, I'm serious. How does 2 bips away from 3% spell good for us? I'm in the camp that still believes that Bernanke is an inflation targetter, and we've not settled down as fast as Fed. & Co. would probably like.

The silver lining, however, is the continued fall in commodity prices. Oil, our biggest culprit in the inflation war has dropped even more today. On a whole, the commodities markets are selling off with some firm moves. In the future, that is very likely to spell out lower inflation. With the pace that oil is falling, I've been wondering about a disinflationary picture. A little too early to tell. But, I think that possibility exists and should be in the back of our minds as a cautionary note.

Looking at our charts, we see the headline inflation taking a small breather from its recent moves down, whereas the core chart shows a continued push higher. I think it's a little hard to really tell right now where we are going. Inflation is pointing higher. But, oil is moving lower. We'll likely know more in the new year.

As for the dollar, it's rallying for good reason. If anyone is going to raise rates faster than the other, it would be the Federal Reserve over the ECB. That's got the euro up against the ropes and is likely to keep it there.

Source: The Dollar is Rallying For a Good Reason