US CPI to reaffirm stall in disinflation progress?

Headline annual inflation is expected at 2.9% with core annual inflation expected at 3.2% in February. The monthly figures are siding with a 0.3% increase for both but the unrounded number is around 0.28% based on analyst estimates. While core annual inflation might come in marginally lower than January, it’s still a high number and keeping above 3% for now. That reaffirms the slower or arguably stalled progress towards the 2% target. Here is what analysts have to say:

Goldman Sachs:

– Core CPI estimated at 0.29% m/m and 3.2% y/y- “Our forecast reflects an increase in used car prices (+0.6%) reflecting an increase in auction prices, an
increase in new car prices (+0.3%) reflecting a decline in incentives, and another large increase in the car
insurance category (+1.0%) based on premiums in our online dataset”- “We expect seasonal distortions to boost the communications (+0.3%) and airfares (+2.5%) categories”- Core PCE inflation estimated at 0.25% m/m

Wells Fargo:

– Core CPI estimated at 0.27% m/m and 3.2% y/y – The report is “to reflect some giveback in a handful
of categories that soared in January (e.g., prescription drugs, used cars, motor vehicle insurance and
recreation services) and lead to softer monthly prints for both core goods and services”- Believes that there is “growing concerns over tariffs” and that is already affecting pricing decisions, which will keep consumer price inflation firmer overall

BofA:

– Core CPI estimated at 0.29% m/m and 3.2% y/y- “While this would be a notable moderation from Jan, it would still be a sticky-high print”- China tariffs will boost prices on core goods ex used car prices- Core services inflation should moderate but continuing to stay above levels consistent with Fed’s target- “In short, CPI data should reinforce our view that inflation progress has stalled”

Morgan Stanley:

– Core CPI estimated at 0.32% m/m and 3.2% y/y- Core prices to decelerate amid a “milder push from wildfires and residual
seasonality than last month”- “In core goods, we see broad deceleration after residual seasonality pushed up January although apparel
reaccelerates after a weak month. In services, rent inflation moves sideways at 0.32%. Core services ex
housing slows but remains high, with pressure from airfare and some continued push from residual
seasonality”

This article was written by Justin Low at www.forexlive.com.