A fourth consecutive disappointing US CPI print has caused analysts at Deutsche Bank to mark down their year-over-year core inﬂation trajectory through year-end.
“As in any CPI report, there were some components which looked abnormally weak. This month these included airline fares, tobacco and physician's services. But the bigger story is a broader core inﬂation slowdown with limited positive payback in several categories that have been weak recently.”
“We now see core CPI inﬂation remaining near 1.7% in year-over-year terms through 2017, having been depressed by recent soft inﬂation prints. In month-over-month terms we continue to expect a rebound through year-end but have taken on board a somewhat softer trend from here compared to our previous expectations. Importantly for the Fed, however, shorter horizon inﬂation rates, such as on a 3-month annualized basis, should exhibit a noticeable uptick to above 2% by year-end. More medium-term, our outlook for core inﬂation to normalize remains broadly intact. Macro momentum (e.g., ISM) and a tightening labor market continue to support a pickup in core inﬂation, and key leading indicators for core goods inﬂation, namely the dollar and consumer PPI data, support some further ﬁrming.”
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