Headline flat, core rounds higher
Headline CPI surprised to the downside and came in flat in January, as declines in energy prices offset strength elsewhere. The monthly change in core CPI was +0.3%, which surprised slightly to the upside versus consensus expectations for a +0.2% change. Overall, annual inflation rates remain soft, with headline running at 1.6% and core at 1.9%. Despite regular concern about higher incipient inflation by some in the markets, the data have not lent support to that view. We expect that inflation will remain at or below the Fed’s long-run target for the next few years, removing that as a consideration for changing the Fed’s policy stance.
Read the full report here.