The effect of past energy price declines on headline inflation are subsiding. Pass-through from prior US dollar appreciation is also set to fade.
Import prices fell, in line with previous episodes of dollar appreciation, but this was insufficient to offset rising consumer goods prices, especially in autos.
Waning dollar and energy pass-through effects plus rising services inflation suggest the disinflationary trend has come to an end.
"We expect core inflation to bottom in the current quarter before rising gradually through year-end, meeting the Fed's inflation threshold for rate hikes later this year." says Barclays Capital
