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Nordea: CPI To Display Further Stubbornly High Prices

US OUTLOOK/OPINION
  • Nordea see CPI inflation coming in stronger than expected in May, with headline holding at 8.3% Y/Y (cons. 8.2%) and core only dipping from 6.2% to 6.1% Y/Y (cons. 5.9%) albeit with slight risk to the downside.
  • The primary driver of headline is energy prices after a 9% gasoline price increase in May.
  • Core inflation has recently seen a large pickup in stickier services categories, and housing components will rise in a similar fashion to April with a similar story in other services.
  • Airline fares will moderate from April on lower jet fuels, but high frequency data shows high travel demand.
  • Goods inflation will fall on a Y/Y basis but it’s still a matter of base effects rather than a sequential development.
  • The Fed really needs to see deflating goods prices and service inflation not to accelerate further, yet service inflation is almost surely going to rise in the next months.

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