Inflation is the next big thing for mkts....>

US VIEW: Inflation is the next big thing for mkts. BMO analysts called Fri CPI a

"key metric. And while the NFP data offered some suggestion that wages are

continuing to grow at reasonable rates (2.5% YoY), the crucial link between wage

growth and inflation gains is still very much missing."

- They will focus "not just on the contribution of shelter" to CPI, "a

long-running theme), but on the breadth of the gains and the strength of the

core inflation print. Our baseline is for some improvement to the headline as

positive inflation and CPI seasonals boost inflation reads early in the yr.

However, until we see broader, demand-pull inflation taking hold (instead of the

more prevalent cost-push variety) we'll keep 5s/30s flattener as our "go-to"

long-term view."

- They said a "weak inflation print will not make or break" Fed's 2018 hike path

and as FOMC minutes said, "Fed has divorced the hike path from the inflatn and

employmt reads to some extent." But "after a sizable miss in core-CPI for Dec

(Nov data), it's more difficult to wave away weakness as merely transitory, esp

at a time when inflation generally starts to see some seasonal improvement."