RBC: Feb US CPI likely to be the low point for inflation in 2019

RBC Capital Markets analysts note that the US headline inflation edged down to 1.5% y/y in February to its slowest pace in more than 2y.

Key Quotes

“Energy prices rose after 3m of declines, & should exert less downward pressure on headline inflation going forward. We think Feb’s reading will be the low point for inflation in 2019.”

“Ex food and energy CPI also dipped to 2.1% from 2.2%. Core inflation has been slightly above 2% for a year now but is showing no evidence of accelerating, which should reinforce Fed’s current pause.”

“The combination of softer inflation readings and strengthening wage growth is boosting real incomes. Headline inflation is likely to remain below 2% for much of the year, which will keep that positive story for consumers in play.”