US: February CPI in line with expectations - Natixis

Thomas Julien, Research Analyst at Natixis, notes that the US total CPI rose by 0.1% MoM in February (slightly above expectations) as the decline in energy prices was more than offset by the rise in core inflation and food prices.

Key Quotes

“As we were expecting, the rebound in the price of core goods in January was temporary. Inflation gained 0.2pts to settle at 2.7%. Core inflation lost 0.1pt to 2.2% (in line with expectations).”

“Consumer prices increased by 0.6% MoM in February, above consensus expectations (0.0%MoM) but in line with ours (+0.1% MoM). The decline in energy prices (-1.0% MoM) was more than offset by the rise in core prices (+0.2%) and food prices (+0.2% MoM).”

“Core prices rose by 0.2% as the rise in the price of services remained solid while the price of core goods remained stable. As expected, the sharp increase in core goods prices seen in January proved to be temporary (probably due to seasonal adjustment issues).”

“All in all, total inflation gained 0.2pts to 2.7% in February while core inflation lost 0.1pt to 2.2%.”

“In short, report was in line with expectations, with no sign of overheating in core prices. Since inflation is progressively moving up, it should help the Fed to back its plan to tighten at a faster pace (but still gradual) this year.”  

“Looking forward, we expect total inflation to remain close to 3% the coming months as base effects, higher oil prices and rising tensions on the labor market (with accelerating wages) are likely to push inflation higher in the medium run. The risk on this forecast is now twofold with on the one hand a decline in oil prices recently and on the other potential changes in fiscal policy that may generate more inflation (public spending, immigration reform and tariffs…).”