US Watch – Why inflation might continue to disappoint

by: Bill Diviney

  • Core inflation is bottoming, but the pickup is likely to be slow
  • We expect core CPI to trough in Q1 at 1.6% yoy, with annual inflation of 1.7% in 2018, and a more pronounced firming in 2019, to 1.9%
  • While wage pressures appear to be building, the near-term impact on inflation is likely to be limited, given stronger productivity growth
  • Shelter has been the main support for inflation in recent years, but the cooling that began last year looks set to continue
  • Medical inflation is structurally lower than before Obamacare, and we see little to suggest this will change
  • The clearest sign of upward pressure is from core goods; a reduced drag could add 15-20bp to core inflation over the next two years
ABN-AMRO-US-Watch-Why-inflation-might-continue-to-disappoint.pdf (137 KB)