US CPI data suggest FED will not hike in Sep - ING

Rob Carnell, Chief International Economist at ING affirms that today’s US CPI numbers suggest that the Federal Reserve will not hike in September.

Key Quotes:

“US headline CPI remained unchanged in July, in line with downbeat expectations following a soft PPI figure last Friday. The annual rate of inflation dipped down to 0.8%YoY in July from 1.0%YoY in June. The story for the core rate of inflation was not much better. Core inflation shed 0.1pp on the month to fall to an annual rate of 2.2%YoY.

“But most other components remain very weak. Overall goods prices (commodities) are falling at 2.5%YoY, and non-housing related service prices also remain weak. That service price weakness probably reflects ongoing soft wages growth.”

“But for the members of the FOMC, this is another reading that shouts a message for continued caution with respect to the pace and timing further rate hikes. Despite some further good news from the labour market, we see little case for a September rate hike, which suggests that a December hike is the best chance for a hike this year, and our forecast remains that the next hike will not be until 1Q2017.”