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US CPI: Headline eased, core remains consistent with Fed’s inflation goal - Wells Fargo

Data released today showed that the CPI Index was unchanged in November and the year-over-year rate dropped from 2.5% to 2.2%. Analysts at Wells Fargo point out consumer prices were flat in November as a drop in energy prices offset increases for food and core items. 

Key Quotes: 

“The more benign inflation picture for both November and the most recent 12 months has been due in large part to the pullback in energy costs. November’s plunge in oil prices led to a 4.2% drop in gasoline prices.”

“Core inflation rose 0.2% as the underlying trend in inflation remains firm.”

“At 2.2% year over year, the core remains consistent with the Fed’s target, as CPI tends to run a few tenths above the core PCE deflator. Recent developments, however, suggest that the overall inflation picture is at little risk of becoming unbridled from the Fed’s goal.” 

“The dollar’s continued strength should help to keep a lid on goods prices even as tariffs have pushed some input costs higher.”

“Capacity constraints—particularly for labor—and a greater willingness to raise prices mean a marked pullback is unlikely. We expect core CPI to run moderately above 2% in 2019, giving the Fed the green light for some additional tightening.”

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