US CPI: Inflation pressures remain tame - Wells Fargo

After today’s US CPI reports, analysts from Wells Fargo, consider that the debate amongst Federal Reserve officials should remain robust as they assess whether the inflation backdrop warrants a near-term rate hike. 

Key Quotes: 

“Following soft monthly performances in May and June, the headline Consumer Price Index (CPI) edged higher in July, rising at 0.1 percent. The modest gain, however, missed expectations and, therefore, continues to paint a backdrop of tame inflationary pressures.”

“Inflation pressures were no greater when excluding food and energy. Core CPI also edged up a weaker-than-expected 0.1 percent on the month, keeping the year-over-year pace steady at 1.7 percent. The shelter index recorded its smallest increase since March (0.1 percent). This modest gain, however, was primarily due to the record 4.2 percent plunge in lodging.”

“Today’s CPI performance does not inspire a lot of confidence that officials are on course for another rate hike this year, though any concerns over a September balance sheet normalization announcement not unfolding have fully dissipated.”

“Our outlook projects a gradual firming in the pace of consumer inflation over the coming quarters. That quickening in the pace of consumer inflation is needed for officials to seriously consider further rate tightening at year’s end. If the pace of inflation fails to turn higher over the coming months, projections for another rate hike this year should dissipate even further and push the next Fed rate hike into 2018.”