A third year in a row has begun with inflation on the rise as investors cling to delusions that the Federal Reserve does not actually care about the data. Both the “Summary of Economic Projections” and minutes from the last Fed meeting of 2023 indicated that the central bank only sees about three interest rate cuts in the back half of this year, yet Treasurys futures have priced in the expectation of twice as many, beginning as early as March. Now, the Bureau of Labor Statistics announced that consumer price index inflation is back on the rise for the first time since September, and once more, the markets seem more prone to projections than to honest predictions.

In the year ending this past December, CPI inflation rose by 3.4%, up from 3.1% in November. On a month-to-month basis, inflation tripled from 0.1% to 0.3% last month. The Fed’s preferred measure of core CPI, that is, the inflation rate without the volatile categories of food and energy, held constant with a 0.3% increase in December, or a 3.9% annualized rate.