Comments on: Savings Bond Alert #014

by: Tom Adams

Fri, 14 Oct 2005 17:47:00 +0000

See my post this morning at http://savings-bonds-alert.blogspot.com/2005/10/inflation-jumps-new-i-bonds-could.html

by: Anonymous

Fri, 14 Oct 2005 16:24:00 +0000

The CPI number came out this morning and it was a 1.20% increase for the month of Sept. I figure the annualized inflation rate for the past 6 months to be 5.65%. If the current fixed rate on I bonds stays the same at 1.20% that would be a rate of 6.85% for the next 6 months on I bonds. That's a serious return in today's fixed income environment. Is my math correct on this calculation?

by: Tom Adams

Fri, 23 Sep 2005 18:06:00 +0000

The difference between our calculations is that yours assumes September's rate will be 0% and mine assumes it will be the same as the rate during the April - August period.

Which month do you think I counted twice?

by: Anonymous

Fri, 23 Sep 2005 17:59:00 +0000

you overcounted one month in the calculation.

by: Tom Adams

Mon, 19 Sep 2005 05:08:00 +0000

Obviously the September inflation rate will make a big difference in the final number. But the March index was 193.30 and August index was 196.40. The math goes like this:

196.40-193.30 = 3.1 points change
3.1 / 5 months = .62 per month
.62 * 12 = 7.44 (annualize)
7.44 / 193.30 = 3.85% inflation rate

1.20% fixed + 3.85% = 5.05%

by: Anonymous

Mon, 19 Sep 2005 01:38:00 +0000

can you double check your prediction, it must be a big mistake,this the monly increase of the CPI-U:

Apr. May Jun July Aug.
0.5 -0.1 0.0 0.5 0.5

assume Sept. is flat (0.0),
that will be 1.4%x2 = 2.8% + fixed rate (1.0%) = 3.8%