Opinions are divided over whether president-elect Donald Trump’s next term will be good or bad for inflation.
An immediate spike in the US 10-year Treasury yield following Trump’s thumping victory over Kamala Harris suggests that Trump’s low-tax, high-tariff policies could indeed lead to a devaluation of the US dollar.
Then again, the US Dollar Index (DXY), which values the greenback against a basket of US trading partners’ currencies, also spiked, suggesting dollar optimism is strong in the short term.
Whatever the outcome of Trump’s next term, US consumers could be facing stubborn inflation in the here and now, according to Wells Fargo analysts.
Wells Fargo expects October’s Consumer Price Index (CPI) to show a 0.2% monthly increase, marking a slight uptick in the annual inflation rate to 2.5%.
Excluding the volatile food and energy components, prices are projected to rise 0.3% for the third consecutive month, sustaining core inflation at 3.3% year over year- about one percentage point above pre-pandemic levels.
While food prices are expected to show slower growth after a 0.4% spike in grocery prices in September, a continued easing in gas prices should help restrain headline inflation.
However, Wells Fargo notes that ongoing geopolitical tensions could exert upward pressure on energy prices.
Core goods are anticipated to rise, albeit modestly, due in part to elevated prices in apparel, household furnishings, and used vehicles.
The October CPI print will be published on Wednesday.