US: Temporary factors washing out of inflation - AmpGFX

In the data due next week for March 2018, the market is expecting a rise in both core and headline CPI annual inflation as these temporary weak data last year begin to fall out of the year-ended change, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.

Key Quotes

“Both underlying and core CPI had their highest monthly increase in several years in January. For the headline, it was a high in five years, for core excluding food and energy it was 12 years.  For the Cleveland Fed trimmed mean underlying measure, it was the largest monthly rise since January a year earlier.”

“The CPI headline and core (ex-food and energy) were as expected in February, but the monthly gains were also much weaker than January, back in a familiar zone. The monthly change in the trimmed mean was particularly weak, down sharply from an annualized monthly gain of 3.36% in Jan to 1.25% in Feb; a low since June last year. The lower inflation outcome in February may have helped cap bond yields in March.”

“Core annual inflation data looked very weak from March to September last year, and has been creeping higher since.  The median market expectation on Bloomberg is for a rise in core inflation from 1.8% to 2.0%y/y in March.”