Global Fixed Income Strategy Dec 2017

Monthly insights and updates from the Invesco Fixed Income team.

Dec 20, 2017 | Invesco Fixed Income

Despite strong economic growth and falling unemployment, US inflation has been stubbornly low. Over the past few months, however, core consumer price inflation (CPI) has been on the rise. Is this reversal the beginning of a new trend, or is it likely to fade? Invesco Fixed Income (IFI) believes the acceleration in US inflation may last several more months, but is not likely to persist through 2018.

US inflation likely to remain tame in 2018

Because inflation is a key determinant of bond prices and US Federal Reserve (Fed) policy, we believe understanding inflation’s drivers and likely path is critical for bond investors.

In our August report, we examined the sharp decline in US inflation between January and July, driven largely by an unusual downturn in “sticky” prices, a bucket of goods comprised of typically stable sectors like housing, communication and healthcare services.

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