External deflationary pressure from the strong dollar and lower commodity prices will continue to keep both headline and core inflation unusually low in the shortterm. The strong dollar's downward pressure on non-energy import prices has pushed core goods CPI into negative territory. Meanwhile, the renewed decline in energy prices will continue holding back headline inflation for a little longer. However, those impacts will fade next year, as external deflationary pressure gives way to domestic inflationary pressure. We estimate headline and core inflation will climb back to the Fed's 2% target in 2016, which is why we expect the Fed will tighten much faster than most anticipate.
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 gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services