Oct CPI rose .2% m/o/m headline and was flat ex f&f, both .1% below expectations. The housing component, which makes up 42% of CPI, was up just .1% mostly due to a .1% rise in Owners Equivalent Rent. Also keeping a lid on the rise in the housing component was a 1% drop in price of hotel rooms. Energy prices rose 2.6% but food by just .1%. As CPI lags the rise in commodity prices, food prices may not continue being this tame. Also, apparel prices fell by .3% and down for a 3rd straight month but rising cotton and polyester prices will likely reverse that too. Vehicle prices fell by .4%. Commodity prices, which make up 40% of CPI, rose by .5%. Bottom line, the Fed makes policy based on the CPI and PCE readings and this data will make them think again that QE2 was the right thing to do but this data is backward looking and I fully expect the rise in commodity prices to filter into inflation readings over the next 3-6 months.