US: Hot summer for core inflation but unlikely to dissuade the FOMC – Wells Fargo


Data released today showed the CPI core index rose 0.3% during August. Analysts at Wells Fargo point out that despite running in line with the Federal Reserve's target, the pickup in core inflation is unlikely to dissuade the FOMC from easing next week. 

Key Quotes: 

“Lower energy and grocery store prices led to a tepid 0.1% rise in CPI prices, but core inflation came in hot again in August. Prices excluding food and energy rose 0.3% for a third consecutive month, pushing the three-month annualized pace of core inflation to a 13-year high of 3.4% and 2.4% over the past 12 months.”

“The disinflationary impulse coming from core goods deflation has ended. Core goods prices increased again in August and are up 0.8% over the past year— the largest one-year gain since 2012.”

“Today’s report shows inflation running in line with the Fed’s target. Inflation as measured by the core CPI deflator tends to run 0.2-0.3 points higher than the core PCE. This is unlikely to reverse the Fed’s recent easing bias, however.”

“We believe the Fed is more concerned about the trade war’s impact on the economy’s growth prospects, and therefore the outlook to inflation further down the road.”

“For a Fed already implicitly shifting toward an “average inflation” target regime, the recent pickup to a rate essentially at its target may still prove insufficient.”

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD hits fresh weekly highs, nears 1.0900

The greenback is in trouble as government bond yields keep falling to record lows spurring gears of recession. Risk-off exacerbated by coronavirus spreading worldwide.

EUR/USD News

USD/JPY pierces 110.00 as fear rules

Wall Street is sharply down for a second consecutive day while US Treasury yields stand at record lows, reflecting investors concerns and backing yen gains.

USD/JPY News

Dollar domination set to continue, with or without coronavirus fears

The coronavirus-related fall in US bond yields has been weighing on the US dollar. Nevertheless – and despite worries coming from Markit's PMIs – the greenback is set to gain more ground.

Read more

Gold: Pares early losses, still in the red below $1650 level

Gold extended previous day's intraday retracement slide from multi-year tops and witnessed some follow-through long-unwinding trade on Tuesday.

Gold News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex MAJORS

Cryptocurrencies

Signatures