U.S. September core inflation expected to rise, likely to remain unchanged on year

Core inflation in the United States is expected to slightly rise during the month of September, although is likely to remain unchanged on an annual basis. Core inflation has moved sideways throughout 2016 looking at both the CPI and the PCE figures. This suggests that upward inflation pressure has been limited.

U.S.’s core inflation is expected to rise 0.2 percent m/m in September, with the rate remaining unchanged at 0.3 percent y/y. Further, headline consumer price index (CPI) is estimated to have risen 0.3 percent m/m during the previous month, although it remains a close call between 0.2 and 0.3 percent m/m.

Further, the rise in headline CPI inflation is mainly due to a lesser amount of negative contribution from energy prices. In addition, core inflation has moved sideways throughout this year, suggesting that upward inflation pressure has been limited.

Moreover, some of the members of the Federal Open Market Committee (FOMC) has explicitly remained dovish (most notably Chair Janet Yellen), mentioning that low inflationary pressure gives the Fed more space to administer a rate hike in the near term, possibly in the December Fed monetary policy meeting.

"We expect a lot of attention to be on whether core inflation will start to pick up in late 2016, as it will be a key determinant of whether or not we get a December rate increase," Danske Bank commented in its latest research report.