Inflation takes a breather

After January’s higher-than-expected numbers, February’s inflation report turns milder

James OngTime to read: 2 min

The US Department of Labor reported March 13 that the overall consumer price index (CPI) and core CPI, which excludes the volatile food and energy sectors, each rose 0.2% in February, in line with market expectations and Invesco Fixed Income’s forecasts. The February CPI release contrasts with January’s CPI numbers, which were higher than expected and provoked a spike in the volatility of risky assets. The February CPI data support our past predictions that inflation would slow, and we believe they represent a trend of continued low inflation in 2018.


The inflation behind inflation

Unexpected trends in housing costs are contributing to recent inflation surprises

James OngTime to read: 3 min

February began with a sell-off in equity, fixed income and other markets, putting an abrupt end to a long period of low volatility. In our view, the catalyst was the January wage growth report, which surprised to the upside and led to worries of accelerating inflation. The January Consumer Price Index (CPI) also posted above-consensus readings and exceeded Invesco Fixed Income estimates. While the reaction was contained and most markets have since recovered significantly, we continue to watch inflation because it is a primary factor affecting US Federal Reserve (Fed) policy decisions and market conditions. Our analysis suggests that trends in housing costs are contributing to the recent inflation surprises.

Housing inflation is in our sights

We at Invesco Fixed Income maintain our base case view that inflation will


Markets face another inflation surprise

January inflation comes in higher than expected. What will it mean for markets and the Fed?

James OngTime to read: 2 min

The Feb. 14 inflation report showed that prices rose more than expected in January, which could raise market concerns over future Federal Reserve (Fed) policy and lead to continued market volatility. The consumer price index (CPI) rose 2.1% year-over-year, compared to consensus expectations of 1.9%, while core CPI rose 1.8%, compared to consensus expectations of 1.7%.1

The market’s focus is on core CPI, shown below, since it is the closest data point to the core personal consumption expenditures index (PCE), which is the Fed’s preferred measure of inflation.