UNITED STATES — RBC reports there were no surprises in today’s October inflation report. Headline CPI ticked up to 2.5 percent year-over-year from 2.3 percent in the previous month. As expected, higher energy prices were the culprit.
“That move should be reversed in November with gasoline prices having fallen over the last month and oil prices continuing to trend lower, including an eye-watering loss yesterday,” reported Josh Nye, senior economist for RBC.
Core inflation saw a trend-like 0.2 percent month-over-month increase in October but the year-over-year rate edged down to 2.1 percent. That rate has been above 2 percent for six months now in one of the most sustained periods of near-target inflation this cycle.
Nye states, “With the economy operating at or beyond its longer run capacity limits, it isn’t surprising that core inflation seems to have found a floor around the Fed’s objective. But at the same time there is little evidence that inflation is breaking out to the upside. And we’ve seen little impact of higher tariffs on consumer prices thus far—a U.S. dollar that is 6 percent higher than a year ago is likely providing some relief on that front.”
He adds, “Well-behaved inflation allows the Fed to continue raising rates gradually. But looking at a broader set of indicators, starting with 3.8 percent GDP growth over the last two quarters, it is clear that monetary policy accommodation is no longer needed. We expect a rate hike in December—the fourth this year—and a continuation of once-a-quarter moves in 2019.”
For more economic research, visit RBC at http://www.rbc.com/economics.
SOURCE: RBC press release