A couple of analysts at Morgan Stanley on the US CPI report issued Wedneday and the implication for the Federal Open Market Committee (FOMC).


  • the 10% increase in oil prices added 35bp to headline CPI for 3 months
  • and just 3bp to core CPI
  • Higher energy prices must be sustained for some time to have a greater, more durable effect
  • The Fed will look through this


  • middle-of-the-road CPI report may have disappointed those who were looking for inflation to establish a clear cooling trend
  • But given how high oil prices are and how strong recent economic data has been, the fact that the numbers were more or less in line with estimates may be seen as a small victory.
  • There will continue to be bumps in this road, but the Fed is still on track to leave interest rates unchanged after next week’s policy meeting



Morgan Stanley