According to analysts from Wells Fargo, today’s US CPI data shows an inflation trend that supports a December rate hike from the Federal Reserve.
“On the strength of energy and shelter costs, headline CPI inflation rose at the fastest pace in five months in September. On balance, consumer inflation is trending in line with expectations for a December Fed rate hike.”
“As reported in the September FOMC meeting minutes, most Fed officials still expect to see continued progress towards the Committee’s 2 percent inflation objective. Today’s CPI report only strengthens those expectations. While some officials noted the “apparent low responsiveness of inflation to the rate of labor utilization” and a possible downward shift in inflation expectations, confidence in the outlook remains firm with the continuation of core inflation strength, additional evidence of higher wage growth, tightening resource utilization and firmer oil prices–all supportive to higher inflation over time.
“Our outlook continues to project headline CPI inflation creeping up to 2 percent by early 2017. Assuming inflation continues to make progress towards the Fed’s 2 percent target, we believe most Fed officials will be comfortable voting for a rate increase at their December 14 FOMC meeting.”