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17 Apr 2015
US headline inflation for March falls to -0.1%YoY, but core rises to 1.8% - ING
FXStreet (Barcelona) - Reviewing the US inflation data release for March, Rob Carnell of ING, views that headline inflation might rise in the coming months after the higher crude prices are factored in, but the interesting part from the data is that, Fed’s measure of inflation outlook - core inflation, has risen to 1.8%.
Key Quotes
“Despite some small rises in energy prices, US inflation fell a little into negative territory in March, to record a -0.1% YoY inflation rate. Housing was softer than expected, but this owes entirely to the lagged effects of earlier energy price weakness feeding through into utility bills. In contrast, housing rents picked up in both main categories to a 0.3%mom pace after recently trending up at only 0.2%mom.”
“After its surprising weakness in February, medical care costs also picked up again, suggesting that the January and February figures were aberrations, not the beginning of a new weaker trend. And apparel prices remained strong – evidence that the US consumer is not in such bad shape, despite some recently mediocre sales figures.”
“The headline inflation rate will begin to move higher in coming months, reflecting higher crude oil and retail gasoline prices.”
“But perhaps more importantly for Fed policy, the core inflation rate has edged up to 1.8%YoY, and it is this, rather than the energy-affected headline that the fed will be watching.”
“Given recent activity data weakness, which has seemed to all but rule out a June rate hike, this data adds an additional, but unhelpfully contradictory inflation element to the rate hike timing debate.”
“That said, it will need corroboration by activity data soon if it is not to be too late for a June hike, and that point of no return may have already been passed.”
Key Quotes
“Despite some small rises in energy prices, US inflation fell a little into negative territory in March, to record a -0.1% YoY inflation rate. Housing was softer than expected, but this owes entirely to the lagged effects of earlier energy price weakness feeding through into utility bills. In contrast, housing rents picked up in both main categories to a 0.3%mom pace after recently trending up at only 0.2%mom.”
“After its surprising weakness in February, medical care costs also picked up again, suggesting that the January and February figures were aberrations, not the beginning of a new weaker trend. And apparel prices remained strong – evidence that the US consumer is not in such bad shape, despite some recently mediocre sales figures.”
“The headline inflation rate will begin to move higher in coming months, reflecting higher crude oil and retail gasoline prices.”
“But perhaps more importantly for Fed policy, the core inflation rate has edged up to 1.8%YoY, and it is this, rather than the energy-affected headline that the fed will be watching.”
“Given recent activity data weakness, which has seemed to all but rule out a June rate hike, this data adds an additional, but unhelpfully contradictory inflation element to the rate hike timing debate.”
“That said, it will need corroboration by activity data soon if it is not to be too late for a June hike, and that point of no return may have already been passed.”