US CPI: Inflation looked anemic, hurricanes aside  - Wells Fargo

According to analysts from Wells Fargo, the increase in the CPI in September took place after gasoline prices surged in the wake of recent hurricanes. They see that core inflation remains rather tepid. 

Key Quotes: 

“As was widely expected, the Consumer Price Index posted one of its largest monthly gains of recent years in September amid a jump in energy prices. The combination of refinery outages following Hurricane Harvey and millions of Floridians hitting the road to avoid the path of Hurricane Irma sent gasoline prices up 13.1 percent in September. All told, gasoline accounted for about three-quarters of the headline’s 0.5 percent increase last month. Beyond energy, however, the effects of Harvey and Irma appeared much more modest. Replacement demand for autos following the storms was not enough to arrest the slide in prices that has been in train since early this year. Despite a 12-year high in new vehicle sales, prices slid 0.4 percent.”

“Excluding food and energy, the core index suggests the trend in inflation emains weak relative to the start of the year. Core inflation rose 0.1 percent, which was enough to bring the 3-month annualized rate up to 2.0 percent. While that is above the current year-ago rate and points to the 12-month change edging a bit higher in the coming months, it continues to run below the roughly 2.2 percent pace of late last year.”

“At a time when the Fed is closely examining all inflation data for clues about whether the slowdown that began last spring is likely to be temporary or persistent, today’s CPI report does not provide much comfort. As indicated in the statement and minutes following the September meeting, FOMC members expected to see inflation lifted temporarily by the hurricane-related bump in gasoline and other items last month. Yet the modest increase in core inflation is likely to keep many Fed officials concerned about the near-term path of inflation and whether another rate hike will be warranted in December. Fortunately for the data-dependent Fed, there will be two more CPI and PCE inflation reports before the December decision, meaning there is still time for greater clarity to emerge.”