17 Dec 2014
US CPI preview, inflation may fall to 1.0% by early new year – ING
FXStreet (Barcelona) - Rob Carnell of ING, feels that it would be a big surprise today if CPI doesn’t fall, further anticipating today’s numbers to mark the beginning of an escalating decline of inflation down to 1.0% in early new year.
Key Quotes
“The inflation numbers today will mark what we believe will be the beginning of an escalating decline that will take inflation down to 1.0% by early New Year, and see inflation fall further to between 0.5% and zero during 1Q and 2Q15.”
“What happens then depends on global oil supply – at the moment, the signs that US supply is moderating are tentative at best. So whilst the base case is of a recovery in energy prices through 2015, the near–term at least looks set to keep headline inflation numbers depressed – perhaps very depressed.”
“The underlying inflation story in the US is not actually all that bad, with core inflation 1.8%YoY, and likely to stay close to this level this month. We do see some leakage of low energy prices into core inflation in time, But near term declines are likely to be limited as some core inflation figures – rents, non-rent services, are still looking reasonably strong.”
“Dollar strength, is also likely to add its weight to already soft core goods inflation – which is more a sign of international weakness than a domestic story the Fed should worry about. But further declines here could also feed through into lower core inflation, adding to our sense that a 2Q15 rate hike is off the radar for now.”
“The upshot of all of this is that it is hard to see the Fed becoming significantly more hawkish in their statement and press briefing today. A softish stock-market background will add a further impetus for caution. Inflation could be consigned to background noise.”
Key Quotes
“The inflation numbers today will mark what we believe will be the beginning of an escalating decline that will take inflation down to 1.0% by early New Year, and see inflation fall further to between 0.5% and zero during 1Q and 2Q15.”
“What happens then depends on global oil supply – at the moment, the signs that US supply is moderating are tentative at best. So whilst the base case is of a recovery in energy prices through 2015, the near–term at least looks set to keep headline inflation numbers depressed – perhaps very depressed.”
“The underlying inflation story in the US is not actually all that bad, with core inflation 1.8%YoY, and likely to stay close to this level this month. We do see some leakage of low energy prices into core inflation in time, But near term declines are likely to be limited as some core inflation figures – rents, non-rent services, are still looking reasonably strong.”
“Dollar strength, is also likely to add its weight to already soft core goods inflation – which is more a sign of international weakness than a domestic story the Fed should worry about. But further declines here could also feed through into lower core inflation, adding to our sense that a 2Q15 rate hike is off the radar for now.”
“The upshot of all of this is that it is hard to see the Fed becoming significantly more hawkish in their statement and press briefing today. A softish stock-market background will add a further impetus for caution. Inflation could be consigned to background noise.”