US CPI: Inflation subsided in February – CIBC

Katherine Judge, analyst at CIBC, explains that US CPI data released today, showed that price pressures came in surprisingly soft in February.

Key Quotes:  

“Both core and headline annual price pressures retreated by a tick despite accelerating wages, which are likely being offset by productivity gains that have resulted in relatively low unit labor cost gains. Overall, core PCE prices should remain below the Fed’s 2% target, allowing central bankers ample time to assess the domestic and global economic picture before likely raising rates once later in the year.”

“Monthly core price pressures inched forward by 0.1%, resulting in a fall in core inflation to 2.1%.  That’s below the average pace seen over the last three months and was driven by a drop in core goods prices.”

“Core inflation readings continue to look soft relative to the strength of the US labor market. Further productivity gains may continue to cushion the impact of rising wages on core prices in 2019, allowing the Fed to remain cautious for an extended period of time.”

“Given that inflation readings have been tame for a while now, USD movements have been contained despite the downside miss, while yields have moved only marginally lower.”