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Wells Fargo: Inflation Likely To Remain Uncomfortably High

US OUTLOOK/OPINION

Wells Fargo writes that the January CPI report makes the "inertia in inflation [look] increasingly difficult to break", with a widening breadth of inflation.

  • "The upside surprise, even as areas like energy goods and autos cooled as expected, illustrates that inflation continues to carry plenty of momentum, and any meaningful slowdown remains elusive."
  • They note that despite rising Covid case numbers, "in person, service-oriented components of the CPI mostly experienced price increases", including airfares, restaurant, and personal care services."
  • As such, pressures in services are broadening beyond shelter, and "it will take a much sharper slowdown in core goods inflation to bring inflation down from its current level".
  • While they continue to see inflation cooling somewhat in coming months, "inflation is likely to remain uncomfortably high for consumers, businesses and the Fed alike", keeping the door open to a 50bp hike in March.

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