US CPI preview: Upward trend in headline inflation will persist - Wells Fargo

On Tuesday, the CPI report for September will be released in the US. Analysts from Wells Fargo, expect an increase of 0.2% in the index, below the 0.3% of market consensus.

Key Quotes: 

“On the back of rising medical and shelter inflation, the core consumer price index (CPI) edged higher in August, and is now up 2.3 percent relative to a year earlier. Core CPI tends to run a bit higher than the Fed’s preferred inflation measure, the core PCE deflator. CPI medical costs have been rising rapidly as more plans move to higher deductibles and health savings account plans, with more of the costs getting passed directly to the consumer. The CPI better captures these out of pocket costs.”

“We also expect some upward pressure in the medical component of the Fed’s preferred inflation measure as healthcare in the Producer Price Index is used in the BEA’s monthly estimate of the PCE deflator. Improvement in core CPI prices and less of a headwind from energy, suggest the upward trend in headline inflation will persist.”