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26 Feb 2015
Energy prices to hold down headline US inflation in January - Nomura
FXStreet (Bali) - Recent declines in energy prices should continue to hold down headline US inflation in January, notes the US Economics Team at Nomura.
Key Quotes
"Recent declines in energy prices should continue to hold down headline inflation in January. We are expecting another double-digit decline in motor gasoline fuel prices that should lead the decline in headline inflation."
"Our forecast for headline inflation is 0.7% m-o-m decline (-0.2% y-o-y) compared with the market consensus of -0.6% . "
"There is some uncertainty around energy and food prices as the PriceStats – alternative goods price data – point to a sharper drop in headline inflation."
"Looking back at the prior month, December CPI came in weaker than our expectation, primarily due to declines in the prices for core goods and airline fares (Figure 3). Note that transitory factors such as the strong dollar and lower gasoline prices again pose downside risk to apparel prices and airline fares in January."
"We expect core inflation, which is more relevant to monetary policy, to be driven by a tug-of-war between lower import prices due to the stronger US dollar and the firming of wage inflation as the labor market continues to improve. Against this backdrop, we expect a slight acceleration in core services prices in January. On balance, we are looking for a modest increase of 0.1% (+0.13%) m-o-m in core CPI (1.6% y-o-y)."
"Yellen did not link the beginning of rate hikes to realized core inflation but rather to when the Committee feels “reasonably confident” that inflation will return to its 2% goal.
"This implies that monetary policy is likely to be conducted in a forward-looking manner. In that sense, realized core inflation in a single month is not likely to impact monetary policy materially."
"However, another month of weak core services prices could affect the FOMC participants’ inflation outlook and, in turn, the path of monetary policy."
Key Quotes
"Recent declines in energy prices should continue to hold down headline inflation in January. We are expecting another double-digit decline in motor gasoline fuel prices that should lead the decline in headline inflation."
"Our forecast for headline inflation is 0.7% m-o-m decline (-0.2% y-o-y) compared with the market consensus of -0.6% . "
"There is some uncertainty around energy and food prices as the PriceStats – alternative goods price data – point to a sharper drop in headline inflation."
"Looking back at the prior month, December CPI came in weaker than our expectation, primarily due to declines in the prices for core goods and airline fares (Figure 3). Note that transitory factors such as the strong dollar and lower gasoline prices again pose downside risk to apparel prices and airline fares in January."
"We expect core inflation, which is more relevant to monetary policy, to be driven by a tug-of-war between lower import prices due to the stronger US dollar and the firming of wage inflation as the labor market continues to improve. Against this backdrop, we expect a slight acceleration in core services prices in January. On balance, we are looking for a modest increase of 0.1% (+0.13%) m-o-m in core CPI (1.6% y-o-y)."
"Yellen did not link the beginning of rate hikes to realized core inflation but rather to when the Committee feels “reasonably confident” that inflation will return to its 2% goal.
"This implies that monetary policy is likely to be conducted in a forward-looking manner. In that sense, realized core inflation in a single month is not likely to impact monetary policy materially."
"However, another month of weak core services prices could affect the FOMC participants’ inflation outlook and, in turn, the path of monetary policy."