The subdued November CPI figures and the news that the Fed left its inflation and interest rate projections unchanged triggered a mini-rally in the bond markets, but arguably investors should be paying closer attention to the surge in producer price inflation. That points to a sharp rebound in goods inflation over the next 12 months. Add a fiscal stimulus into the mix and we think that core inflation is likely to rebound next year more rapidly than the Fed projects, prompting officials to raise rates four times in 2018, rather than the three hikes they currently have pencilled in.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services