US CPI Preview: Banks expecting inflation to continue to firm

Today, we have an all-important release of US CPI for the month of October, which is likely to attract most attention. Here are the expectations of analysts and economists from major banks regarding the upcoming release.

TD Securities

“We look for headline inflation to remain unchanged at 1.7% y/y in October (0.3% m/m), partly aided by an increase in energy prices. Core inflation should decline a tenth to 2.3% y/y, reflecting a 0.2% m/m advance.”

“We expect core goods inflation to recover m/m, but for core services inflation to slow modestly after four straight increases at 0.3%.”

Wells Fargo

Analyst at Wells Fargo expects the US CPI to show an increase of 0.3% in October, in line with market consensus. 

“Below-target inflation has been a key reason for the Fed’s monetary policy bias toward easing. After all, the PCE deflator has run below the FOMC’s 2% target for all but 11 months of the 10+ year expansion, while inflation expectations are at the low end of historical ranges. Concerns about inflation, therefore, remain skewed toward it running too cool, not too hot. Even as the trend in inflation has firmed in recent months, it remains sufficiently tame for the Fed. The core CPI is up 2.4% over the past year, and tends to run 0.2-0.3 points higher than the core PCE deflator, the Fed’s preferred inflation gauge.”

“We suspect prices excluding food and energy were up 2.3% on a year-over-year basis in October. Inflation should continue to firm, but not break meaningfully above the Fed’s 2% target. In the absence of significant price pressure, the Fed will likely keep rates steady in the near-term.”

Danske Bank

“US CPI core has surprised on the upside in recent months, but we do not expect this to be the beginning of a new trend given the low inflation expectations and look for an unchanged inflation rate at 2.4%.”