Whatever way the US CPI report due on Thursday swings, we will come out the other side with one remaining reality – the US is still a 3% to 4% inflation economy. That’s great compared with the near double-digit measures seen in mid-2023. But it’s still nowhere near 2%. Most of the falls from 9% towards 3% have come from base effects. The last bit, the bit to come, is tougher.
Our economists have good and solid views on this, where inflation continues to fall, and we do trend in the direction of 2%. But we are not there yet, and the most worrying aspect is the 0.3% month-on-month expectation for core inflation – annualise that and you get inflation at quite close to 4%. Don’t get us wrong. We’re not saying that inflation won’t fall. In fact, on a conviction view, we expect it will. But we need to be shown the money, as does the market. The Fed will need that too. Hence…
