US finds temporary inflation relief

The current strong economic activity and tight labour market are likely to result in elevated inflation in 2019



Keith Wade
Chief Economist & Strategist

US inflation surprised to the downside today with the consumer price index (CPI) rising less than expected in September. The annual rate fell from 2.7% to 2.3% y/y. Much of this decline was due to the effect of last year’s increase in energy prices dropping out of the index; if we exclude food and energy the core CPI rate was stable at 2.2% y/y. Nonetheless, this was also lower than expected with the weakness concentrated in prices for used vehicles.

When combined with last month’s weaker reading, investors are asking whether we have seen the peak in inflation for this cycle. The base effects will weigh on annual CPI rates for another month or so; however, the core rate is expected to move higher.

Our inflation model predicts a further rise in core CPI as the lagged effects of stronger economic activity push prices higher. Inflation responds to activity with long lags such that next year’s prices are significantly influenced by this year’s activity. The tight labour market also contributes and higher underlying inflation is typical for an economy facing increasing capacity constraints and generating wage pressure. When combined with the estimated effect of tariffs, we expect the core inflation rate to be running above 2.5% through 2019.

Consequently, we see today’s figures as only providing temporary relief on the inflation front and believe it is too early to anticipate the turn in the inflation and interest cycle.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.


Keith Wade
Chief Economist & Strategist


Keith Wade
Economic views

Please consider a fund's investment objectives, risks, charges and expenses carefully before investing. The Schroder mutual funds (the “Funds”) are distributed by The Hartford Funds, a member of FINRA. To obtain product risk and other information on any Schroders Fund, please click the following link. Read the prospectus carefully before investing. To obtain any further information call your financial advisor or call The Hartford Funds at 1-800-456-7526 for Individual Investors.  The Hartford Funds is not an affiliate of Schroders plc.

Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser, CRD Number 105820, providing asset management products and services to clients in the US and registered as a Portfolio Manager with the securities regulatory authorities in Canada.  Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and as an Exempt Market Dealer with the securities regulatory authorities in Canada.  SFA markets certain investment vehicles for which other Schroders entities are investment advisers.”

For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security/sector/country.

Schroders Capital is the private markets investment division of Schroders plc. Schroders Capital Management (US) Inc. (‘Schroders Capital US’) is registered as an investment adviser with the US Securities and Exchange Commission (SEC).It provides asset management products and services to clients in the United States and Canada.For more information, visit

SIMNA, SFA and Schroders Capital are wholly owned subsidiaries of Schroders plc.