December CPI-U is -0.25%

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December CPI-U is -0.25%

Postby mikep » Thu Jan 19, 2012 12:01 pm

December CPI-U is announced today at -0.25%.
http://www.savings-bond-advisor.com/cpi ... on-update/
Which means the first 3 months of CPI-U that determine the I-bond rate for May-November is so far on track to be zero.
So your I-bonds bought today could very well earn 6 months of 3.06% followed by 6 months of zero.
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Re: December CPI-U is -0.25%

Postby sscritic » Thu Jan 19, 2012 12:09 pm

I prefer to get my CPI data from the Bureau of Labor Statistics
http://www.bls.gov/news.release/cpi.nr0.htm




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Re: December CPI-U is -0.25%

Postby bob90245 » Thu Jan 19, 2012 12:19 pm

I wait until they update their numbers (they haven't yet) here:

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
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Re: December CPI-U is -0.25%

Postby sscritic » Thu Jan 19, 2012 12:34 pm

bob90245 wrote:I wait until they update their numbers (they haven't yet) here:

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

But as the SS guy, I need to see the CPI-W figures that are in the press release. I could get them with the data search function, but they are always in the same place in the press release, under "Not seasonally adjusted CPI measures."

How often and by how much are CPI numbers adjusted or updated in your experience? For SS, I only care about July, August, and September, and they announce the SS Cola the same morning that the September CPI is released in mid-October. I have never known them to revise the SS Cola because of a change in the CPI figures. Perhaps that is because the SS Cola only goes out to 1 decimal place, and the July and August figures would have already been corrected, so a small change in the September CPI-W is very unlikely to change the Cola.




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Re: December CPI-U is -0.25%

Postby beareconomy » Thu Jan 19, 2012 12:36 pm

I'm gonna wait for Novemeber i bonds at the rate we are going. I have a feeling inflation will be high later on during the year. I could be wrong, but if given the opportunity, there is no point in going for 0% if you can avoid it.
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Re: December CPI-U is -0.25%

Postby mikep » Thu Jan 19, 2012 12:53 pm

beareconomy wrote:I'm gonna wait for Novemeber i bonds at the rate we are going. I have a feeling inflation will be high later on during the year. I could be wrong, but if given the opportunity, there is no point in going for 0% if you can avoid it.


Even still, buying now gets you guaranteed 1.53% for 11 months+1 day which beats the rate on one year CDs that I am aware of, and that's even before the interest is free of state and local taxes.
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Re: December CPI-U is -0.25%

Postby #Cruncher » Thu Jan 19, 2012 1:44 pm

The wording on Savings Bond Advisor is confusing:
For December, the CPI-U was 225.672 ... Series I bond inflation component is based on the difference between the March and September levels of the CPI-U. In September, the index was 226.889. If the current negative trend continued, the next I bond rate, to be announced in May 2012, would be zero.
The term "I bond rate" is ambiguous. Two I Bond rates will be announced May 1st: Fixed and Inflation. The new Fixed rate likely will continue to be zero. If the negative trend continues, the new Inflation rate will be (duh) negative.

The Composite rate, which is what investors actually receive, combines the new Inflation rate with whatever the Fixed rate was when the bonds were purchased. Assume the semi-annual inflation rate announced May 1st is a negative 1.0%. If you bought your I Bonds in May 2001 when the Fixed Rate was 3.0%, your annual composite rate for the six months May - October would be 0.97% (*). But the composite rate has a floor of zero. So if you bought this past November, when the Fixed rate was 0%, your composite rate for May - October would be 0%. I.e., the bond's value would stay the same. Actually, in this example of a negative 1.0% semi-annual Inflation rate, the composite rate would be zero as long at the Fixed rate at time of purchase was 2% or less.

* 3% + (2 X -1%) + (3% X -1%) See TreasuryDirect Composite Earnings Rates for how this is calculated.
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Re: December CPI-U is -0.25%

Postby MinimalZen » Mon Jan 23, 2012 1:20 am

mikep wrote:
beareconomy wrote:I'm gonna wait for Novemeber i bonds at the rate we are going. I have a feeling inflation will be high later on during the year. I could be wrong, but if given the opportunity, there is no point in going for 0% if you can avoid it.


Even still, buying now gets you guaranteed 1.53% for 11 months+1 day which beats the rate on one year CDs that I am aware of, and that's even before the interest is free of state and local taxes.


I think it can be withdrawn at 9 months and 1 day. Since losing 3 months interest at 0% is still $0.00.

So Ally Bank HYS for 3 months then iBonds for 9 months?
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Re: December CPI-U is -0.25%

Postby TheEternalVortex » Mon Jan 23, 2012 1:27 am

MinimalZen wrote:
mikep wrote:
beareconomy wrote:I'm gonna wait for Novemeber i bonds at the rate we are going. I have a feeling inflation will be high later on during the year. I could be wrong, but if given the opportunity, there is no point in going for 0% if you can avoid it.


Even still, buying now gets you guaranteed 1.53% for 11 months+1 day which beats the rate on one year CDs that I am aware of, and that's even before the interest is free of state and local taxes.


I think it can be withdrawn at 9 months and 1 day. Since losing 3 months interest at 0% is still $0.00.

So Ally Bank HYS for 3 months then iBonds for 9 months?


No, I-Bonds can't be sold until you've held them for 1 year.
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Re: December CPI-U is -0.25%

Postby Mel Lindauer » Mon Jan 23, 2012 1:37 am

Remember, too, that if we were to experience a deflationary period, even the 0% I Bonds would have a positive real return. The larger the deflation number, the higher the 0% I Bond's real return would be.
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Re: December CPI-U is -0.25%

Postby detifoss » Mon Jan 23, 2012 2:27 am

Mel Lindauer wrote:Remember, too, that if we were to experience a deflationary period, even the 0% I Bonds would have a positive real return. The larger the deflation number, the higher the 0% I Bond's real return would be.


true, though with truly severe deflation, cash would beat 0% nominal I-bonds as it is even more liquid
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Re: December CPI-U is -0.25%

Postby MoneyOCD » Mon Jan 23, 2012 1:15 pm

I think it is too early to make predictions about 0% I-bonds starting in May. End of the year had negitive CPI-U change very often, but May inflation component ended up to be negative only once. It definately can happen again but chances are much better for positive number. Data is here
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Re: December CPI-U is -0.25%

Postby Sheepdog » Mon Jan 23, 2012 1:22 pm

MoneyOCD wrote:I think it is too early to make predictions about 0% I-bonds starting in May. End of the year had negitive CPI-U change very often, but May inflation component ended up to be negative only once. It definately can happen again but chances are much better for positive number. Data is here

Interesting chart which I had not seen. Thanks for copying it for us.
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