As we move through the second week of January, the time has arrived for my latest US CPI preview. In December, I expect a major drop in the YoY CPI growth rate, and one which is larger than the consensus forecast. Let’s delve in!
Thank you for your comprehensive analysis Mr. Anastasiou. Question: The US FED looks mostly at Core Inflation. What is your expectation there. Given the 6-month lad for housing that you mentioned, it would seem that the decline in Core inflation will be more moderate that the for the total CPI. Any comparative numbers with November's?
It's certainly possible that core inflation may be more persistent than headline inflation given its higher weighting to lagging shelter costs (whether or not the length is 6 months is unclear, the 6-month lag has historically been appropriate for CPI food at home prices versus the UN FAO Food Price Index).
This is why Fed Chair Powell's recent language surrounding analysing inflation ex-shelter is vitally important. I expect the Fed to focus on PCE/core PCE ex-lagging rents as the rest of the PCE Price Index declines over the year ahead.
Thank you for your comprehensive analysis Mr. Anastasiou. Question: The US FED looks mostly at Core Inflation. What is your expectation there. Given the 6-month lad for housing that you mentioned, it would seem that the decline in Core inflation will be more moderate that the for the total CPI. Any comparative numbers with November's?
It's certainly possible that core inflation may be more persistent than headline inflation given its higher weighting to lagging shelter costs (whether or not the length is 6 months is unclear, the 6-month lag has historically been appropriate for CPI food at home prices versus the UN FAO Food Price Index).
This is why Fed Chair Powell's recent language surrounding analysing inflation ex-shelter is vitally important. I expect the Fed to focus on PCE/core PCE ex-lagging rents as the rest of the PCE Price Index declines over the year ahead.