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Fall In US Inflation

James Boston
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Fall In US Inflation

As the Federal Open Markets Committee (FOMC) prepares to make it’s scheduled monetary policy statement this evening, Fed watchers will be paying particular attention to the updated inflation situation announced this morning. This is particularly the case as recent comments from two of the members of this committee have suggested that the link between unemployment, inflation and interest rates should be re-established. The Fed moved away from this policy earlier in the year in favour a more timed approach, namely that rate hikes would not begin until at least six months after the end of the US’ quantitative easing program, this is scheduled for completion next month.

The US Bureau of Labor Statistics has just made the latest inflation data, relating to the month of August, available. The headline Consumer Price Index (CPI) reading for the month now stands at 1.7%, this compares to the 2.0% achieved in July and there was a market expectation for a moderation of the pace of price growth to 1.9% in August. Month on month the US CPI is reading at -0.2% in comparison to a slight increase of 0.1% in July, economists had anticipated this falling back to a flat 0.0% rate of change today.

The more stable reading of the Core CPI (excluding food & energy) has come in at 1.7% year on year, the July number was 1.9% and there was no expectation of any deviation from this. Month on month this Core number has been recorded as 0.0% compared to 0.1% expansion in July and an expectation today for a reading of 0.2%.

In terms of absolute numbers, the CPI now stands at a non seasonally adjusted 237.85, this is up from 238.25 in July, for reference the base of this figure was established in the 1982-1984 period at a level of 100.

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