Inflation jumps to 1.4%.
The next issue is, when will bonds start their long climb to 6%?
For too long, the Fed has supported the long end of the curve and now it has a problem.
The Fed is trapped between a solidly stalled economy, and powerful, potential money growth.
As the data show, the collision produces inflation before it produces growth.
So much for the excess capacity argument. Even with excess capacity, inflation grows.
Next stop on the bond contract: 114.00, down from 116.00 today.
After that support level is broken, the bonds are heading to 105.00 and eventually, par.
Tactic: shorten maturities of assets and lengthen maturities of liabilities.
* * * * * J B K * * * * *
San Francisco
Feb. 18 (Bloomberg) -- Wholesale prices in the U.S. accelerated more than anticipated in January, led by a jump in the costs of energy, light trucks and pharmaceuticals.
The 1.4 percent rise in prices paid to factories, farmers and other producers followed a 0.4 percent increase in December, according to figures from the Labor Department in Washington. Excluding food and fuel, so-called core prices rose 0.3 percent, exceeding the median forecast in a Bloomberg News survey.
Raw materials costs rose the most in more than three years as factories boosted production to meet demand of a growing global economy. Capacity utilization below its two-decade average and a lack of job growth may limit the ability of suppliers to pass on those costs, allowing the Federal Reserve to keep interest rates near zero to help bolster the economy.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aVp4c86EAwJA
