by Calculated Risk on 3/25/2015 07:05:00 PM

Some excerpts from a research piece by Goldman Sachs economist Kris Dawsey: Core Inflation Still Has Room to Fall

... With the PPI and CPI reports already in hand for the month, we think that the core PCE price index—the Fed’s preferred inflation measure—will post an above-trend 0.20% increase in February. ... In light of the latest news, one might be tempted to wonder whether we have seen the bottom on core inflation, which could help the Fed to be "reasonably confident" that inflation will be moving back to its target over the medium term—a precondition for the first rate hike.

We ... find that in the near term downward pressure on core inflation from the effects of the stronger dollar and energy price pass-through are likely to overwhelm upward pressure from diminished slack in the economy. ... Recent firmness in shelter inflation—which appears insensitive to dollar and oil effects—is likely to persist, but we think that core goods inflation will probably move down further. Our bottom-up analysis suggests that headline and core consumer prices will probably bottom around the middle of the year ...

Thursday:
• 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 293 thousand from 291 thousand.

• At 11:00 AM, the Kansas City Fed manufacturing survey for March.