US CPI Supports Fed’s Inflation Outlook - Wells Fargo
According to analysts from Wells Fargo, today’s US CPI numbers support
the Federal Reserve outlook that inflation is gradually trending toward
its target.
Key Quotes:
“Led by higher energy prices, headline CPI increased a
stronger-than-expected 0.4 percent in April. Core inflation was also
firm, supporting the Fed’s outlook that inflation is gradually trending
towards target.”
“Greater stability in commodity prices and fading import price deflation
should begin to show up in the form of firmer prices for consumer goods
in the coming months. The pickup in headline inflation may also help
boost inflation expectations, instilling even more confidence with Fed
officials over the anticipated path of inflation.”
“We project inflation will continue to move gradually higher, with
headline CPI rising to a 1.7 percent year-overyear pace in the fourth
quarter and core CPI edging up to a 2.3 percent pace by year’s end. If
the Fed’s preferred measure of consumer inflation, the PCE deflator,
mirrors the upward path of CPI, which is our call, the data dependent
Fed will have at least one area that it is “monitoring” signaling some
justification for a rate hike.”