Inflation Rate Understated Due to Calculation Error - TheStreet

(Updated from 10:07 a.m.)

Bonds are under pressure in part because a

report in today's

Washington Post

says an error in calculating the

Consumer Price Index

(

definition |

chart |

source

) resulted in the key inflation measure being understated.

The Bureau of Labor Statistics

confirmed that it will revise CPI data for January to August, and that the increase over that period will be revised to 2.7% from 2.6%. The bureau will release corrected data on Thursday at 10 a.m. EDT.

The

Washington Post

article says the correction is likely to add 0.1 to 0.3 percentage points to the overall and core inflation rates. Overall inflation was running at a rate of 3.4% in August, while core inflation, which excludes food and energy, was running at 2.5%, nearly a two-year high.

A higher inflation rate devalues bonds because it erodes the value of the fixed interest payments they make.

The benchmark 10-year Treasury note lately was lately down 10/32 to 99 9/32 yield 5.846.

The BLS said the error was in the portion of the report that measures housing costs, and that software used for the calculations was responsible.