US: Upward pressure on core goods prices is an unwelcome development for the Fed – Wells Fargo – by MSalordFX Inflation UnitedStates Banks
market consensus. The drivers behind the upside miss were broad-based and mostly in the "core" components, explained analysts at Wells Fargo. According to them, it will take at least several consecutive monthly inflation readings of slowing price growth for the Federal Reserve to believe that it has inflation in check.“The June CPI was expected to be hot, but today's report downright burns.
“The Fed was already worried about inflation becoming entrenched, hence the super-sized 75 bps rate hike in June. Today's report is likely to further fan those fears. If the choice set for the Fed's next move remains between a 50 or 75 bps rate hike, 75 bps is the clear pick. However, with inflation getting even further offsides, the Fed may be looking at third option at its upcoming meeting: a 100 bps hike.
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