US CPI: Headline inflation expected to firm to 1.7% y/y in November - TDS

Analysts at TDS suggests that the US headline inflation is expected to firm to 1.7% y/y in November, reflecting a 0.2% rise in consumer prices on the month.

Key Quotes

“Higher gasoline prices should lend a moderate contribution, partially offset by lower energy services prices (natural gas and electricity), while food prices likely remained flat. Excluding food and energy movements, core prices are expected to rise 0.2% on the month, leading the core inflation rate back to 2.2% y/y. Besides the sustained thrust from home and rental prices, prices are expected to be supported by stronger gains in healthcare and transportation services prices, the latter on higher oil prices. Given a solid November release in line with our expectations, the headline CPI is on track to firm to 2.0% y/y by December.”

“Foreign Exchange

With the CPI release coming a day after what is widely believed to be the second hike by the Fed in a decade, FX markets will likely view the inflation data with little fanfare. Our consensus expectation should have little implications for the USD but we think that a negative surprise will just viewed as an opportunity to “buy the dip”.”