DO THE financial markets believe that the typical American
consumer is on a permanent fast, walks everywhere and survives
without heating or air conditioning? After a jittery few weeks,
bond markets rallied on June 15th on news that America's core
consumer price index rose by just 0.1% in May. The data were
warmly greeted by stockmarkets too. The Dow Jones index rose by
86 points on the day. Investors decided that the absence of
price pressures would calm the nerves of rate-setters at the
Federal Reserve, who have been worrying out loud about
“elevated” core inflation.  What the markets blithely ignored
was the day's bad news. Headline consumer prices rose by 0.7%,
the biggest monthly increase for nearly two years. Unlike core
inflation, the headline measure includes fuel costs, which rose
sharply, as well as food prices. For bond prices to rise on such
a big jump in inflation, markets must be placing a great deal of
faith in the core index as the true gauge of price pressures. Is
that wise?  The cold-and-hun