RBC: The Surprise Is That Some Expect Soft Aug CPI Data To Delay Taper

RBC muses that the "real surprise" out of the CPI report was"the amount of people wondering if the soft core relative to consensus was enough to delay taper. Does the backdrop really require a delay because core missed on soft airfares and lodging?"

• Apart from the latter two categories "that may have gotten dinged in part by delta", RBC saw inflation pressures as "fairly broad based".
• "There is no question as we have long expected that prices will continue to slow from the current incredibly lofty pace. The bigger question is the extent to which it will slow."
• They see consumption outpacing production by "a fair amount", with the consumer still healthy, and production challenges not fading "in earnest" until well into 2022.
• In sum, "we believe all of those global disinflationary forces that were present pre-pandemic will eventually show through again. But not over the coming year."
• The risk is that the handoff from goods to service spending has not been as forceful as RBC had expected, and if that handoff remains "soft" then the acceleration in services prices will not occur to the degree required to offset further slowing in goods inflation.