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US Inflation Rises

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US Inflation Rises

The US Bureau of Labor Statistics has been busy this morning publishing Consumer Price Index (CPI) data. Headline US inflation has again picked up as measured by the key CPI year on year number which has just been released for March, this is currently reading at 1.5%, higher than the February figure of 1.1% and beating the consensus estimate of 1.4%. The month on month change in this number is also upward, March is showing accelerating prices of 0.2% compared to 0.1% in February, economists had predicted this number to be closer to the previous months 0.1%.

In order to get a more stable reading of the fundamental price growth within an economy it is always useful to look at inflation data without some of the more volatile elements included. In this regard the US CPI ex Food and Energy has once again come in higher at 1.7% growth year on year, this not only tops last months number but is also ahead of what the market expected. Month on month this ex Food and Energy figure reads as an 0.2% growth in prices for March, again ahead of the both the February posting and the March consensus of 0.1% growth.

The US is currently in a comfortable inflationary position, although a slightly larger pick up would be welcomed by the monetary authorities, it is still however in a region that supports this current phase of growth. The Federal Reserve will not likely be in a hurry to raise interest rates until inflation stabilizes closer to or ideally slightly above the two percent level. There are obviously other factors to also consider before monetary tightening can begin properly in the US, unemployment being the main one, this is unlikely to prompt the Fed into action until early to mid next year which at the current pace of price growth should give inflation enough time to stabilize.

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