US CPI likely to bottom at -0.5% y/y in March 2015: Barclays

Quotes from Barclays Capital:

- We have revised down our CPI forecast for Jan, but have pushed up the profile thereafter following the increase in gasoline and oil futures prices since our last update on 16 Jan. The NSA CPI for Jan is now lower at 223.7 (from 223.9), owing to a slightly larger drag from the energy component than we had expected, as well as a lower core inflation number. 

- We expect headline CPI to have declined 0.6% m/m (sa), and on a y/y basis, we expect it to have decreased 0.1% (0.0% previously). For the rest of the forecast horizon, the CPI profile is higher by about half an index point, on average. We think that the bulk of the effect on headline inflation from lower energy prices would have passed through by the end of Q1 and expect CPI inflation to move upwards from then on. 

- As a result, we expect CPI to bottom at -0.5% y/y in March 2015 and then to move up to 1.6% by the end of the year (1.3% previously). We expect core CPI to have increased 0.1% in January, leaving the y/y rate at 1.6% (1.7% previously). We forecast core CPI at 2.0% at the end of 2015 (Q4/Q4) and 2.6% at the end of 2016. However, the strengthening of the dollar and recent downside news on imported prices and producer prices pose some downside risks to our forecast for 2015.