US headline inflation is under pressure from external influences: TD Economics

Quotes from TD Economics

- Today's inflation report continued to emphasize the theme that has been developing for several months now, whereby headline inflation is under pressure from external influences while core prices are supported by domestic factors.

- Key external factors consist of falling crude oil prices and the strengthening greenback, which are driving down prices of energy commodities and core goods (which are often imported). These factors are largely transitory, and whereas the dollar continued its ascent through February (implying further pressure on non-petroleum import prices), energy prices have already seen a bounce back in recent weeks.

- Moreover, prices of core services and food away from home (such as restaurants) that are more driven by domestic factors, remain supported by increased utilization of economic resources. And while wage pressures still remain subdued by historical standards, falling unemployment is likely to pressure these upward, and may manifest in stronger pricing pressures for services that are particularly labor intensive. With this in mind, we continue to expect the Fed will begin to raise rates later this year, so as to ensure that inflationary pressures remain contained.