U.S. inflation is taking a breather – TD Securities
10.10.2019, 15:00

U.S. inflation is taking a breather – TD Securities

Analysts at TD Securities note that the U.S. headline inflation surprised to the downside in September at 0.0% m/m (0.023% unrounded), keeping the annual rate unchanged at 1.7% y/y (TD and consensus: 1.8%).

  • “At 0.1% m/m (0.132% unrounded), core inflation finally lost some steam in September following three consecutive 0.3% increases in Jun-Aug. Despite the softer-than-expected monthly print, core inflation remained at a still solid 2.4% y/y for September.
  • Looking into the details, weakness in the core segment was largely explained by a -0.3% drop in core goods prices, which registered its first decline in four months.
  • On the other hand, core services inflation remained firm on a monthly basis, rising 0.3% m/m.
  • Although inflation continues to be a factor in the Fed's reasoning behind recent rate cuts, 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. Weaker PPI and CPI inflation reports aren't likely to change that picture, in our view.
  • We continue to expect the Fed to deliver another rate cut at the end of the month, with global growth, manufacturing, and trade also remaining key concerns.”

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