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Wells Fargo research team suggests that the latest print of 2.2% y-o-y rate of US core inflation suggests no immediate pressure on FOMC to lift rates again soon, but there are few signs of inflation buckling again either as the overall inflation environment continues to look benign as far as the FOMC is concerned.

Key Quotes

“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.”

“We doubt inflation will get out of hand, however, as input cost growth has begun to ease and a modest revival in productivity is keeping higher labor costs manageable.”