Earlier today the July CPI report was released at the same time as the explosive Initial Claims report (we make no apology for concentrating on the latter in real time). Although CPI was in line with expectations at 2.0%, as was "core" CPI at 1.7%, and therefore will not have surprised the market it is still worth considering the possibility that we are close to a turning point in the inflationary cycle.

Almost 5 years ago at the time QE (or to be accurate CE) was introduced the few who noticed we dominated by "inflation hawks" who complained vociferously about monetary debasement. With several years of low to negative inflationary reports the link between overly generous monetary policy and a build up in inflationary pressures has become largely discredited, and to the extent inflation is a target for the US (and other central banks following the Bernanke Doctrine) it is because there is "not enough" of it present in the economy.

It is therefore interesting to note the stabilizing of CPI shown in this month's report, with the trailing 12 month ma bottoming at 1.70% over the last 4 months and now hinting at a move higher. We would not be surprised to now see a series of higher than expected reports going forwards.

Meanwhile US money supply growth continues to motor higher. M1 is growing at 11.6% YoY and has increased by almost 80% from its level at the start of Credit Easing, reaching $2.52 trln this week. M2 growth is currently 6.6% YoY, well above both the growth rate of GDP and that of CPI. Since September 2008 M2 has grown by approximately $3 trln, or 38%. Over this 5 year period the amount of media attention devoted to M2 has dropped off considerably (see chart) with monthly stories falling from between 800-1000 in the 2008-2010 period to around 400 stories a month today (see chart). We suspect we may be entering a period of greater discussion of both CPI and the influence of monetary growth upon it.