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US CPI Preview: Inflation should continue to firm, but not break meaningfully above the Fed’s target – Wells Fargo

On Wednesday, inflation data from the US will be released. Analyst at Wells Fargo, expected the CPI to show an increase of 0.3% in October, in line with market consensus. 

Key Quotes: 

“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.”

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