Fed Will Stay on Hold in September, Pimco's Wilding Says

Summary

Pimco economist Tiffany Wilding reviews the latest US CPI report, calling it in line with expectations and a relief for Federal Reserve officials. She expects the Fed to remain on hold in September and sees shelter disinflation continuing. Gasoline prices could rise slightly in August on Middle East oil risks, but energy price effects should fade unless oil keeps rising.

• July CPI was in line with expectations, with core inflation around 0.22% month-over-month unrounded.
• Wilding's lean is that the Federal Reserve remains on hold in September.
• Hawkish Fed members are unlikely to change their minds based on this report.
• Shelter inflation is continuing to disinflate despite inertia in government data.
• Airfares were stronger due to higher jet fuel prices but may moderate with energy.
• Retail gasoline prices could increase a little in August on Middle East/Iran oil risks.
• One-time energy price adjustments should fade, potentially helping headline inflation next year.