27 Feb 2015
US negative inflation won’t impact the June rate hike view – ING
FXStreet (Barcelona) - James Knightley, Senior Economist at ING, views that the negative annual inflation rate at -0.1%yoy plotted by the US economy as a result of soft energy prices shouldn’t have an impact on the probable June rate hike.
Key Quotes
“Headline CPI fell 0.7% MoM, leaving the annual rate of inflation at -0.1% YoY. Core inflation (ex food & energy) came in at +0.2% MoM leaving the annual rate unchanged at 1.6%.”
“.. this is the first negative annual inflation reading since 2009, but any talk of deflation is well wide of the mark.”
“Energy commodity prices are the clear drag, falling 34.7% YoY and outside of this there are merely a handful of components seeing price falls.”
“Nonetheless, the plunge in energy prices is a positive story for consumer spending. Indeed, consumer confidence is close to record highs so the windfall to household spending power should be seen as a boost to growth prospects and therefore mediumterm inflation.”
“Furthermore, inflation expectations series suggest that there is little threat of “deflation fears” becoming entrenched.”
“With the Fed expecting inflation to gradually rise to two percent in the medium term “as the labour market improves further and the transitory effects of lower energy prices and other factors dissipate”, this and upcoming inflation numbers shouldn’t stand in the way of a June rate hike.”
Key Quotes
“Headline CPI fell 0.7% MoM, leaving the annual rate of inflation at -0.1% YoY. Core inflation (ex food & energy) came in at +0.2% MoM leaving the annual rate unchanged at 1.6%.”
“.. this is the first negative annual inflation reading since 2009, but any talk of deflation is well wide of the mark.”
“Energy commodity prices are the clear drag, falling 34.7% YoY and outside of this there are merely a handful of components seeing price falls.”
“Nonetheless, the plunge in energy prices is a positive story for consumer spending. Indeed, consumer confidence is close to record highs so the windfall to household spending power should be seen as a boost to growth prospects and therefore mediumterm inflation.”
“Furthermore, inflation expectations series suggest that there is little threat of “deflation fears” becoming entrenched.”
“With the Fed expecting inflation to gradually rise to two percent in the medium term “as the labour market improves further and the transitory effects of lower energy prices and other factors dissipate”, this and upcoming inflation numbers shouldn’t stand in the way of a June rate hike.”