US CPI: Inflation remains on track for the Fed - Wells Fargo

According to analysts from Wells Fargo, today’s inflation data and signals that the core inflation remains firm, offers little reason for the Federal Reserve no to follow through with a rate hike today. 

Key Quotes: 

"Following six months of solid gains, including January’s sizeable 0.6 percent surge, the headline Consumer Price Index (CPI) took a breather in February, edging up only 0.1 percent on the month. Despite the muted monthly performance, headline CPI increased to its highest annual pace since March 2012 at a 2.7 percent year-over-year rate. Low base effects remain favorable to a high year-over-year calculation and will remain so for the next six months.”

“Higher energy prices had been the primary driver of headline inflation over the past six months leading into this report. That changed in February with energy prices falling 1.0 percent, its first decline since July 2016 and led by a 3.0 percent drop in retail gasoline prices. With crude oil prices declining as of late, retail gasoline prices may fall further in the coming months.”

“Core CPI inflation rose a trend-like 0.2 percent in February, but increased at a strong 3.0 percent annualized rate over the past three months—the fastest pace since January 2008—and will no doubt will be taken notice by the Fed.”

“As the Fed prepares to deliver its updated economic outlook at today’s FOMC meeting, there is a good chance the committee may lift its 2017 inflation calls, currently at 1.9 percent on the headline PCE deflator and 1.8 percent on the core PCE deflator. If it does, it would signal the Fed’s confidence that inflation is trending in territory supportive of multiple rate hikes this year.”