US: Price pressures are building in the domestic economy - Rabobank

Stefan Koopman, Market Economist at Rabobank, notes that the US headline CPI inflation increased by 0.2% m-o-m, which was solid but also a tenth weaker than expected.

Key Quotes

“An increase in gas prices was partly offset by a decline in food prices. The annual rate of headline inflation fell back from 1.1% to 1.0%, but core inflation edged higher, from 2.1% to 2.2%, on the back of rising core services inflation. In fact, this rose to a post-recession high of 3.2% y-o-y.

This is another signal that price pressures are building, in particular in the domestic economy. Given that the slack in the labour market is reducing, last month’s Employment Report notwithstanding, wage inflation is likely to keep upward price pressures on US services.”