Fortunately, these two items, along with energy prices, are totally irrelevant to our economy and personal consumption, and so don't matter all that much to the Federal Reserve.
The increases in these two "non-essential items" were the biggest in 15 years.
CPI rose 0.2%, following the 0.4% gain in December. Core prices rose 0.3%.
Inflation ex-inflation was, as always, flat.
On a related note, the BLS has changed the way they are reporting CPI data. Be sure to put this into the file marked Precision ex-Accuracy:
The consumer price index for the first time will be carried out to three decimal places instead of one, a change that will allow inflation to be monitored more precisely. Previously, rounding sometimes led to misleading readings, as it could mean the difference between a change of, say, 0.2% and 0.3%.
Reporting inaccurate inflation data to 3 decimals does run the slight risk of creating a false impression of accuracy where none in fact exists; however, the benefits of this change could avoid some of the goofier rounding errors we have seen over the years.
Mathematically, it is possible to be precise but not accurate (and vice versa).
Let's call this a modest improvement in BLS reporting and move on . . .
CONSUMER PRICE INDEX: JANUARY 2007
BLS, Wednesday, February 21, 2007
CPI Now Gets Three Decimals
WSJ, February 21, 2007; Page A2