US: Has inflation bottomed? – Deutsche Bank

Alan Ruskin, Macro Strategist at Deutsche Bank, explains that every month for five months now there has been an excuse for the soft US CPI numbers and we did not learn anything from the latest data that convincingly suggests core inflation is about to accelerate.

Key Quotes

“This month it was lodging away from home that made the difference between a 0.1% core CPI and a 0.2% number. Like a poorly behaved kid every month there is a new excuse and after a while the excuses don’t count and CPI is viewed as genuinely soft.   On a similar track, we have had 5 weaker than expected CPI numbers on the trot after the March core inflation came in below the survey median by more than any time in at least the last 20 years making the lack of payback even more remarkable.”

“The idea that inflation will pick-up is again dependent on models that show prices lagging recent healthy growth; some gradual currency pass-through; and payback in some components like lodging away from home, new cars, physician services etc.  For now DB is still looking at the 3m annualized core CPI coming in close to 2% in the  3 months  of data before the Dec FOMC that can secure another rate hike this year, but this possible source of support for the USD will be regarded by the market as too tentative to change the negative USD tone.”