In view of analysts at Amplifying Global FX Capital, US CPI inflation has been much weaker than expected in recent months.
Key Quotes
“Fed officials, including Yellen in her recent June 13 FOMC meeting, tended to dismiss this as related to special factors, such as a competitive price war on telecommunications.”
“San Francisco Fed President Williams on Monday reinforced these views saying “Some special transitory factors have been pulling inflation down,”….. “But with some of these factors now waning, and with the economy doing well, I expect we’ll reach our 2 percent goal some time next year.” …. “The very strong labor market actually carries with it the risk of the economy exceeding its safe speed limit and overheating, which could eventually undermine the sustainability of the expansion”
“Nevertheless, various core measures that are designed to strip out the effects of individual outlier components show a significant fall in underlying inflation in recent months.”
“Market-based inflation expectations have also fallen in recent months. The Fed has simply said, since January, that “market-based measures of inflation compensation remain low”.”
“The 5yr5yr forward measure of inflation compensation from inflation-linked securities and derivatives suggests that expectations have reversed all the gains since the election of Trump.”
“Expectations for Personal Consumption Expenditure and PCE Deflator data due on Friday are low, based on recent weak CPI and retail sales data.”
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