US: Core inflation is expected to pick up further during summer - Nordea Markets

"US core CPI rose 0.2% m/m and 2.2% y/y in May in line with expectations. We expect core inflation to pick up further during summer and that the Fed continues with one rate hike per quarter," Nordea Markets analyst Kjetil Olsen notes.

Key quotes

"The main driver for the increase in core inflation is core service inflation, reflecting higher wage pressures."

"Momentum remains close to 2% but there are upside risks ahead. We expect core inflation to reach 2.5% during summer and rise very gradually during the remainder of the year in tandem with a further rise in wage growth due to the strong labour market."

"The Fed has recently stressed the symmetric nature of the inflation target and will not adjust their plan due to today’s number. A rate hike tomorrow is set in stone. We believe today’s figure together with a continued strengthening of the labour market will take the median voter to signal a total of 4 hikes in 2018, up from 3 previously."