US inflation helps Fed rate hike story - ING

Jose Ricaurte Jaen Analista independiente

James Knightley, Senior Economist at ING, notes that US consumer price inflation came in exactly in line for December with the headline rate rising 0.3%MoM leading to an annual inflation rate of 2.1% versus 1.7% in November. The core (ex-food and energy) rose 0.2%MoM. Leaving the annual rate at 2.2% versus 2.1% previously. This is the first time that both headline and core US inflation is rising at 2% or more since 2Q2014.

Key Quotes

Fuel prices were the main culprit with energy prices rising 1.5%MoM and transportation costs increasing 1%MoM. Most other components rose 0.2% or 0.3% but there was some softness in food (flat on the month) and apparel (-0.7%MoM)

With headline inflation likely to move up towards 2.5% in the second half of the year and President Trump promising pro-growth and pro-job policies in what already is a fairly strong story, it means further Federal Reserve rate hikes are not far away. We expect the next one in March with a further move higher in 3Q17.

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Author

Jose Ricaurte Jaen

Analista independiente

Born in Colón (Panamá). Over the last years, he has been designing currency algorithms for the retail industry.

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