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Inflation data released on Wednesday in the US showed lower-than-expected readings for January. According to analysts at Wells Fargo, expect inflation to ramp up this year as spending takes off and inflation expectations show businesses and consumers are positioned for higher prices.

Key Quotes: 

“The 0.3% rise in January’s Consumer Price Index was primarily driven by higher gasoline prices. Excluding food and energy, prices were unchanged over the month, with weakness continuing to be concentrated in services.”

“Excluding food and energy, there are few signs that inflation is gaining any immediate traction. The core index was unchanged in January.”

“Although core inflation is off to a slow start, we expect price growth to pick up over the course of the year. Low inventories and ongoing bottlenecks should continue to underpin goods inflation in the near term, particularly as another round of fiscal support is beginning to make its way through the economy.”

“We look for headline CPI to run north of 3% in Q2, driven by higher energy costs and low base effects. While the 12-month rate of inflation should ease over the summer, we expect the CPI to run around 2.5% year-over-year in the back half of 2021, with the core index firming.”