U.S. CPI reading unlikely to change calculus for Fed in near-term – TD Securities
11.12.2019, 15:09

U.S. CPI reading unlikely to change calculus for Fed in near-term – TD Securities

Analysts at TD Securities note that U.S. headline inflation surprised to the upside at 0.3% m/m (0.258% unrounded) in November, lifting the annual rate to 2.1% from 1.8%.

  • "Looking into the details, core goods inflation was flat m/m in November following two negative prints in September and October. A still-firm 0.6% m/m gain in used vehicles and a stabilization in apparel prices (0.1% m/m) contributed to the core goods category.
  • On the other hand, core services inflation recovered to 0.3% after the slight drop to 0.2% in October (Figure 2). Shelter prices advanced a firm 0.3% on the back of 0.3% and 0.2% m/m increases in rents and OER and a 1.1% rise in other lodging. Medical care services inflation, while slowing versus October, remained strong at 0.4% m/m, as hospital services printed 0.3% in November.
  • Although inflation has been a factor in the Fed's reasoning behind its easier stance this year, we don't see this month's CPI reading changing the calculus for the Fed in the near-term. Core PCE inflation remains below target and inflation expectations continue to hover below the historical levels associated with price stability. We expect the Fed to keep rates on hold in the near term, but to ease further in 2020 as economic growth continues to moderate."

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