1) we don’t even have food inflation here. The CPI for just food and beverages showed all of a 1.5% gain from December 2009 through November 2010. Going back to what Francis was saying about labor this makes a lot of sense, as the biggest component of most food items isn’t the actual commodity itself, but the labor and other cap ex that goes into producing/transporting it.

1a) The current food commodity rise has little to do with US monetary policy and is much more related to crop failures in Russia/Australia, our stupid ethanol policy, demand growth in the 3rd world, and speculation. Using monetary US monetary policy to fight food/oil price increases would essentially be shooting the whole economy for limited gains, especially if demand from China/India continue to grow and put upward demand price pressures on those commodities in spite of Fed action.

2) On Core vs total CPI, the core is a good measure because it shows the pricing power of the economy as a whole and not just the commodity input costs. The total is still important to watch though, as in a given year that dictates the extra “tax” on us of increased costs.