Forex »

US Inflation Slows Significantly

James Boston
Share on StockTwits
Published on
www.finances.com
US Inflation Slows Significantly

Consumer price growth in the US has yielded a significant and unexpected slowdown according to the latest inflation figures just released by the US Bureau of Labor Statistics. November’s Consumer Price Index (CPI) has been announced as having contracted by -0.3% month on month, some slowing had been detected following last month’s flat 0.0% reading but most analysts had been predicting a fall in the rate to just -0.1%. The headline year on year CPI now reads at just 1.3%, this represents a sizeable drop from the October reading of 1.7% and compares to an expected figure of 1.4%.

Despite this slowdown in general price growth activity the inflation level in the US is still within a range acceptable to the monetary policy makers, there is an obvious downward trend that has taken the rate further below the Federal Reserve’s 2% target level. This can be explained by the dramatic fall in energy prices, most notably oil, in recent month’s which is most likely a net positive for the US economy, additionally this comes at a time of accelerating growth which in effect adds to the head room available to the monetary authorities to remain ‘accommodative’ for a while longer in order to encourage stability into the growing economy.

Once food, and most importantly energy, are stripped out of the inflation numbers than it can clearly be seen that the core inflation reading is more in line with what would be expected of an economy at this stage in the growth cycle. The latest Core CPI figure, for the month of November, has been announced as 1.7% year on year, this is only a one point fall from the previous reading of 1.8% and although it misses the expectation of no change it does broadly remain in line with market predictions.

Share on StockTwits