The inflation that we all worried about earlier this year is showing up in the monthly numbers. It’s too early to say whether the higher readings are transitory, as the Fed would say, or here to stay.

The most recent reading showed that inflation for the 12-months ending in July is 4.2 percent for ‘core’ inflation, and 5.3 percent for headline inflation. What’s core inflation? It’s the headline number but excludes food and energy.

Now, I wish I had a dollar for every time someone said, ‘who the heck doesn’t buy food and fill up their tank? Why would you exclude those things?’ Or, better yet – ‘the prices are through the roof at the grocery – do you even know the price of milk?!’

Truth be told, I don’t know the price of milk, and I drink a lot of it. Maybe that’s why I don’t know the price; I’m buying it regardless.

Although no one asked me recently, the numbers above are different enough that I thought I would look into the differences because I always have to make some milk toast comment about how the headline number has a lot of noise that obscures the overall price trend.

I have to admit that I was a little surprised by the data from the St. Louis Federal Reserve FRED database. Since the beginning of the two datasets, the annualized rate of inflation for headline inflation is 3.61 percent and is 3.60 percent for the core data.

That alone tells confirms what I’d been saying, but the fact that the headline number is about 25 percent more volatile than the core number really brings it home.

Still, that’s over a 60+ year period, and we know just from the last month that the variations can be large. So, I charted the rolling one-year inflation numbers below: core in orange and headline in blue. You can see that they follow each other closely, albeit more closely before the 1990s.

Personally, I think the inflation will be transitory, but of course, I don’t know and it is interesting to see how both numbers have spiked of late. If you take shorter time periods like the last six months and annualize them, you get even bigger numbers, but I don’t think that’s necessarily fair.

And, I suspect you’re hearing the anecdotal stories that I’m hearing about rising prices (besides the cost of milk). Yesterday, I popped a tire on a massive pothole (be careful on the Forest Park Parkway near DeBailiviere), and the repair people told me not to bother looking in the showroom while I waited since there was almost nothing there due to the supply chain issues.

If the inflation is mostly due to supply chain issues, then suppliers will create more supply, unchoke the supply chain, and prices will go back to normal. The question, I think, is what happens to wages in the meantime. If employers feel like they have to pay up to compete, that’s where I think sustained inflation will come in. Right now, I’m reading more about signing bonuses than higher wages, but that could change.

Of course, we’ve been on top of the inflation story since it’s come out, and so far, stocks and bonds have done just fine. The bond market hasn’t kept up with inflation over the past year, but it has easily outpaced inflation over the past three years, regardless of whether you look at core or headline inflation.

We’ll continue to keep a close eye on how these numbers unfold, report them to you, and make changes as appropriate. In the meantime, I’m thirsty and am going to go enjoy a glass of milk.