Goldman Sachs economist says in-line CPI keeps Fed hike option open

Goldman Sachs economist Alexandra Wilson-Elizondo said the latest Consumer Price Index reading was broadly in line with expectations, a result that on the surface matched what investors wanted to see. At the same time, she said the report raises uncertainty around next week’s rate decision rather than settling it. According to Wilson-Elizondo, the data did not fully capture some of the inflation pressures that have recently emerged, and there is little evidence that inflation is returning to target in the near term. She also noted that the survey period for the report came before the latest rise in energy prices and before the rally in commodities spread from energy into metals and agriculture. Her assessment was that the inflation print does not rule out stronger price pressures ahead. In her view, the report allows the Federal Reserve to keep the option of raising rates on the table without forcing immediate action. She added that markets may now pay closer attention to Waller’s communication, energy prices, labor market data, and incoming developments rather than today’s release alone.