US: Inflation environment continues to look benign  – Wells Fargo

Inflation data for January was released today in the US. According to analysts from Wells Fargo, the underlying trend in core inflation remains firm.

Key Quotes:  

“Headline consumer prices were unchanged in January for the third consecutive month. Another soft headline reading was to be expected given the recent decline in oil prices. Retail gasoline prices fell 5.5% in January and are down 10.1% from a year ago.”

“Core prices rose 0.2% in January for the fifth consecutive month, marking the longest streak in 11 years.”

“The overall inflation environment continues to look benign as far as the FOMC is concerned. The 2.2% year-over-year rate of core inflation suggests no immediate pressure on the FOMC to lift rates again soon, but there are few signs of inflation buckling again either. With core inflation at a 2.7% annualized pace over the past three months, the recent trend remains firm.”

“We expect headline inflation will dip further over the next few months due to the drop in both energy and food prices the past few months. Core inflation should move somewhat higher. A weaker dollar is expected to lend some support to core goods prices, while rising labor costs and a willingness among businesses to raise prices should underpin services inflation.”