External deflationary pressure from the strong dollar and lower commodity prices will continue to keep both headline and core inflation unusually low in the shortterm. The strong dollar's downward pressure on non-energy import prices has pushed core goods CPI into negative territory. Meanwhile, the renewed decline in energy prices will continue holding back headline inflation for a little longer. However, those impacts will fade next year, as external deflationary pressure gives way to domestic inflationary pressure. We estimate headline and core inflation will climb back to the Fed's 2% target in 2016, which is why we expect the Fed will tighten much faster than most anticipate.
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