US: Headline CPI to retreat to 1.5% y/y thanks to lower gasoline prices - TD Securities

"We expect headline CPI to retreat to 1.5% y/y thanks to lower gasoline prices. Outside of fuels we still see strength across food and core services," TD Securities analysts said in a recently published report reviewing next week's events. "The latter should underpin a 0.2% m/m print on core CPI, translating to a 2.1% y/y increase. All eyes are on OER and rents, which we expect to rebound by 0.3%. Downside risks include corrections in medical care services and hotels."

Key quotes

"Of the few Fed speakers next week, voting member George should get the most attention as she has pivoted more dovishly of late — particularly on the balance sheet. This is notable as she has been a die-hard hawk for years. Repeating support for patience should be marginally dovish for markets. Non-voters Mester and Bostic both speak twice, but should cancel each other out."

"We forecast retail sales to rise 0.1% m/m in December, slightly down from 0.2% previously. The shutdown-affected release should continue to reflect a negative impact from lower gasoline prices and a more measured expansion in core sales. That said, we see risks to the upside given the resiliency of the US consumer on the back of a strong labor market and steady wage growth."