The latest consumer price index (CPI) numbers are out for March.  The CPI rose 0.1% in March 2016.

That is the number that gets the headline news.  The median CPI, which is far more stable (and probably reliable) was up 0.2% in March.  Year over year, the median CPI is up 2.4%.  It has been at 2.4% or 2.3% for at least the last 6 months.

The bottom line is that consumer price inflation is low, at least according to government statistics.  If we lived in a free market world without central banks and fiat currencies, then there would likely be no price inflation, or there would even be mild deflation.  This would reflect increased productivity.

But compared to the last 100 years with the existence of the Fed, the price inflation is relatively low.  I don’t think it properly accounts for the steep rise in health insurance and medical care costs.  And that is what most families are struggling with in terms of increasing expenses.  But that is as much or more a reflection of government policies than it is of monetary policy alone.

The Fed has been in tight money mode for a year and a half since QE3 ended in October 2014.  Interest rates have stayed low, but that is a market response to the fear in the economy and the Fed’s previous loose policy.  The massive excess reserves built up by the commercial banks mean they don’t have to borrow overnight funds to meet reserve requirements.  This keeps the federal funds rate low.

There is continued debate about whether interest rates will go up or down.  In the short run, I still see a greater probability of interest rates staying flat or going down further.  This is a reflection of a weakening economy.

I think interest rates will only spike significantly when price inflation becomes a problem, or at least a perceived problem.  It is not a perceived problem by most people right now.

Therefore, I continue to conclude that interest rates will not spike higher until we see higher price inflation.  I know the government statistics should be taken with a grain of salt.  But they are useful for a trend.  And right now, there is no sign of price inflation picking up with any significance.

At some point in the future, there will be a time where it will be very profitable to bet against bonds, or in other words, bet on higher interest rates.  It will be one of those great opportunities that does not come around very often for investors.  But that time is not now.  We are still not close to it.

We will probably have to see more so-called quantitative easing from the Fed before we see a significant increase in price inflation.

Therefore, I would bet on gold before I would bet on higher interest rates.  Rising interest rates will lag behind rising gold.  I can’t be certain of any of this, but that is how I see it playing out.

The likely order is: recession, then Fed money creation, then rising gold, and finally rising interest rates.

We can’t be sure of any of this because it all revolves around human decision making.  But the safest bet is on the Fed going back to money creation when times get tough.  You never know what could happen, but it is usually a safe bet when dealing with central planners at the Fed.