US CPI profile revised down on energy price assumptions

US CPI forecast has revised  from the last update on November 17. Since then, gasoline futures prices for delivery through September 2016 have moved higher, while longer-term futures prices have declined modestly. Futures prices for crude oil, natural gas and heating oil have broadly declined. Importantly, the spread between futures prices and retail spot prices for gasoline has narrowed back toward its long-term historical average more quickly than we had anticipated.

The change in assumed spread over the first few months of the forecast horizon, combined with lower futures prices for other energy goods, outweighed the impact of higher gasoline futures prices in our forecast. As a result, CPI NSA index forecast is now 0.2-0.4 points lower over the forecast horizon.

"We expect energy prices to be a drag on m/m headline inflation through March 2016. Our profile for core CPI remains unchanged; we expect a modest softening in the first half of 2016, driven by a negative base effects and the impact of the stronger dollar. Thereafter, we forecast modest increases bringing the y/y rate of core CPI to 1.7% by the end of 2016",says Barclays.

"We forecast a 0.0% m/m (sa) reading for headline and a 0.2% m/m (sa) increase in core consumer prices. This should bring the y/y rate of headline CPI inflation up to 0.5%, and core up to 2.0% y/y. We forecast the CPI NSA index to come in at 237.2', added Barclays.