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US CPI: Core inflation slows a touch – Wells Fargo

Data released today showed that the Consumer Price Index rose in February 0.2% and the core 0.1%. Analysts at Wells Fargo point out that nothing in today’s report suggests the FOMC is likely to adjust its “patient” stance soon. 

Key Quotes: 

“Consumer price inflation continues to be fairly tame. The CPI rose 0.2% in February, but slipped to 1.5% on a year-ago basis due to lower energy prices over the past year. Core inflation slowed, but is running at a 2.1% annualized pace over the past three months and on a year-over-year basis, close to the FOMC’s goal.”

“Core inflation eased up a bit in February, as prices rose 0.1% (0.11% before rounding) after five months of 0.2% gains. The weaker print can be traced to a drop in core goods prices, which fell 0.2%.”

“While labor costs have been heating up—average hourly earnings growth hit a new cycle high in February—the pass-through to consumer price inflation continues to be only modest. Stronger productivity growth over the past year has kept unit labor costs in check, while historically high profit margins leave companies some scope to absorb higher labor costs. As a result, inflation looks unlikely to get out of hand. That should allow the FOMC to keep its patient stances over the next few months and watch incoming data. We expect the inflation trend to remain firm near 2%.”

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