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    US: Inflation expectations unchanged despite oil rebound - Wells FargoMatías Salord

    According to analysts from Wells Fargo, inflation expectation changed little despite the rebound in crude oil prices (80% from lows) but warned that it could be a timing effect. Key Quotes:“Despite oil’s rebound and pickup in core inflation, inflation expectations have changed little in recent months. History and demographics suggest that the Fed appears correct in remaining cautious about a full recovery.”“Since oil prices began to tumble in mid-2014, inflation expectations have followed suit. While a decline in short-term inflation expectations was to be expected, longer-term expectations sank right alongside oil. Yet, with oil prices recovering roughly 80 percent since earlier this year and inflation picking up, long-term inflation expectations have not changed much.”“The lack of a rebound has caught the Fed’s attention. As Chair Yellen noted in a speech this week, a sustained decline in expectations would raise doubts about how quickly inflation would return to the FOMC’s target.”“The muted response to the rebound in oil and gasoline prices may just be a timing effect. After all, consumers’ inflation expectations were slow to respond to the initial drop in oil in mid-2014. Once consumers see that a rebound in gasoline prices could stick around a little longer and actual inflation picks up, inflation expectations may follow suit.”“However, in other episodes in which oil prices collapsed outside of an economic expansion (1985-86, 1993-94, 1997-98) long-term inflation expectations never fully recovered until oil hit a new record high.” 

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