US CPI: Looking for a 0.1% rise in headline prices - Westpac

Analysts at Westpac are looking for a 0.1% rise in US headline prices while excluding food and energy, a 0.2% gain is expected.

Key Quotes

 “Growing doubts over the US inflation pulse has materially reduced market expectations of further policy action by the FOMC. Heralding the start of the second half of 2017, the July CPI report will be a critical outcome for the market.”

“Recently we highlighted that the vast majority of the deceleration in annual inflation, from 2.8%yr in February to 1.6%yr in June, had been due to transitory factors – most notably weak energy prices and an unusually large decline in the price of wireless telephone services. Abstracting from these two factors, annual core inflation at June was 2.1%yr. There is therefore little reason to be concerned that disinflation will become entrenched.”

“That said, strong inflation is also unlikely anytime soon as wage growth remains modest. We look for a 0.1% rise in headline prices; excluding food and energy, a 0.2% gain is expected.”