US CPI Supports Fed’s Inflation Outlook - Wells Fargo

US CPI Supports Fed’s Inflation Outlook - Wells Fargo

17 May 2016, 18:14
Roberto Jacobs
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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.”


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