Will US CPI return to target - ANZ

Analysts at ANZ explained that opinion is sharply divided about whether 2018 is the year that global, and particularly US , inflation finally makes a come-back.

Key Quotes:

"Friday’s inflation data will raise confidence that it will gradually return to target, which would argue in favour of further yield curve steepening. Tighter labour markets, anecdotal evidence of growing wage pressures, above-trend growth, fiscal expansion and still negative real policy rates all point to intensifying US inflation pressures. 

The economy is certainly entering 2018 with very strong momentum, which is consistent with the Fed gradually but consistently raising the fed funds target. High confidence, a strong equity market, a strong jobs market and expected tax cuts are all helping. But some argue that structural inflation suppressants will again see inflation disappoint. 

If inflation should manifest, the question is how much central bank tightening – in terms of both rate rises and balance sheet run-down – global financial markets can stand after years of exceptionally easy policy."