US: Core inflation tending toward target – Westpac

Analysts at Westpac point out that US core inflation (excludes food and energy) printed its strongest increase in 11 months in December as prices rose 0.3%.

Key Quotes

“Price gains were broad based across the sub sectors, with the most significant contributions coming from autos; health and rents. Overall, the December outcome gave further support to the view that the inflation pulse is strengthening. Over the year to December, core prices were up 1.7%yr, headline inflation 2.1%yr.”

“Come January, a similar result is expected, albeit with momentum in core inflation being a little more modest. Core prices are expected by Westpac and the market to rise 0.2%, leaving annual inflation at 1.7%yr. Headline prices are likely to rise 0.4% in the month thanks to strength in energy inflation. Base effects should still see annual headline inflation tick down to 2.0%yr, from 2.1%yr in December.”