Fed inflation goals remain on track
Continued monthly inflation of two ticks a month would keep the US on track to meet the Federal Reserve’s inflation goals. Interest rate normalisation will proceed accordingly.
11 Aug 2017
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Markets expect headline and core consumer price index (CPI) prices each rose by two ticks in July. If so, that would lift headline CPI inflation to 1.8% year-on-year from 1.6% in June and lift core inflation to 1.8% from 1.7%. Continued monthly inflation of two ticks a month seems like a reasonable presumption for the next few months, so long as oil prices remain stable and wages don’t take off as they’re bound to do eventually. Those two ticks per month would lift core CPI inflation to 2.0% y-o-y by October. The same path would lift core personal consumption expenditures inflation – the US Federal Reserve’s favoured gauge – to 2.0% y-o-y by December. In short, Fed inflation goals remain on track. Interest rate normalisation will proceed accordingly.