US inflation makes case for cautious Fed - ING
Rob Carnell, Chief International Economist at ING, suggests that the US headline inflation falls to 0.8%YoY from 1.0%YoY in July which suggests Fed will not hike in September.
Key Quotes
“US headline CPI remained unchanged in July, in line with downbeat expectations following a soft PPI figure last Friday. The annual rate of inflation dipped down to 0.8%YoY in July from 1.0%YoY in June. The story for the core rate of inflation was not much better. Core inflation shed 0.1pp on the month to fall to an annual rate of 2.2%YoY.
Within the breakdown, housing and rentals remain stronger than the headline, with rents growing at 3.3%YoY. Medical care is also an outlier with inflation here running at 4.0%YoY, and tobacco also bucking the low headline trend with inflation of 2.9%YoY.
But most other components remain very weak. Overall goods prices (commodities) are falling at 2.5% YoY, and non-housing related service prices also remain weak. That service price weakness probably reflects ongoing soft wages growth.
But for the members of the FOMC, this is another reading that shouts a message for continued caution with respect to the pace and timing further rate hikes. Despite some further good news from the labour market, we see little case for a September rate hike, which suggests that a December hike is the best chance for a hike this year, and our forecast remains that the next hike will not be until 1Q2017.”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
