US: Core inflation suggests no need for the Fed to alter its course on policy – Wells Fargo

Data released today showed the CPI in the US rose 0.2% in December, slightly below the 0.3% expected. According to analysts at Wells Fargo, the inflation picture looks little changed in light of December’s CPI data.

Key Quotes: 

“Excluding food and energy, however, the trend in inflation is little changed and suggests no need for the Fed to alter its course on policy.”

“Even as tariffs on the last tranche of goods from China were avoided in December, tariffs on roughly two-thirds of consumer goods imports from China remain in place. The impact to goods inflation, however, not only remains minimal, but is also fading.”

“On net, the CPI shows that the trend in inflation remains steady.”

“It remains right at the Fed’s target at 2.0% and, along with core CPI, suggests that while inflation may not be taking off it is not capitulating either.”

“There does not appear to be a need for the Fed to add additional accommodation at this time for the sake of boosting inflation. But with wage growth softening recently and Fed officials hinting at a desire for the core PCE deflator to overshoot for a period, taking back last year’s insurance cuts remains a distant prospect.”