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https://seekingalpha.com/article/4285302-july-inflation-means-social-security-tips-bonds
We now have one of the three data points that will be used to calculate the above. Don't spend it yet. Anything can happen with the next two months of data. Plus the Medicare part B premium is projected to go up by $8.80 a month. Depending on the size of your social security benefit, that will eat up part or all of your increase.
We now have one of the three data points that will be used to calculate the above. Don't spend it yet. Anything can happen with the next two months of data. Plus the Medicare part B premium is projected to go up by $8.80 a month. Depending on the size of your social security benefit, that will eat up part or all of your increase.
Summary
Both headline and core inflation numbers came in higher than expected, indicating inflation is not 'dead' and deflation is not looming.
The July number sets a path for a 1.6% to 1.8% increase in the 2020 Social Security cost-of-living adjustment.
At this point, with two months of data remaining, the I Bond's variable rate will be higher than the current rate of 1.4%. It will be reset on November 1.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% in July on a seasonally adjusted basis, the U.S.Bureau of Labor Statistics reported today. Over the last 12 months, "headline" inflation increased 1.8%.
Both the July increase and the year-over-year number were higher than expected. The consensus forecast was for an increase in 0.2% in July and 1.7% over the last 12 months.
Core inflation, which removes food and energy, also increased 0.3% in July and is up 2.2% over the last 12 months. The July number matched the consensus forecast, but inflation watchers had expected core inflation to come in at 2.1% year-over-year.
It's possible that these higher-than-expected inflation numbers could create a bit of turmoil in the stock and bond markets. Pre-market numbers are predicting a moderate slump in stock prices at the market's opening today.
What this means: Social Security COLA
The Social Security Administration will set next year's cost-of-living adjustment based on the average inflation index for July, August, and September, using a different index: the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
For July, CPI-W index was set at 250.236, an increase of 1.7% over the last 12 months. But this is only the first of three months of data that will set the Social Security COLA for 2020. Because the SSA uses an average of three months, at this point the COLA would be 1.6%, with two more months of data remaining.
However, based on my projections, the July index of 250.236 is actually on track to create an increase of 1.8%. But anything can happen with inflation; it's very difficult to predict. For example, a potential tariff trigger on September 1 could spur a bump in inflation in that month.