25 May 2015
Rising U.S core-inflation makes Fed’s job harder – MP
FXStreet (Barcelona) - The 0.3% mom rebound in US core consumer prices has led the Fed to enter in a state where they can’t delay a rate hike until US data improves, says Dean Popplewell, VP of Currency Analysis and Research at MarketPulse.
Key Quotes
“The +0.3% month-over-month increase in core-consumer prices in April, which pushed the three-month annualized rate of core-inflation up to a four-year high of +2.6%, leaves Yellen and company with less scope to delay raising interest rates until it sees more evidence of a rebound in ‘real’ activity.”
“With the employment cost index suggesting that U.S wage growth is accelerating and the CPI indicating that underlying price inflation is rising, the Fed really cannot wait forever before beginning to raise interest rates from near zero.”
“Since the FOMC’s late April meeting, U.S. economic news has been generally mixed, keeping rate hike odds favoring a September liftoff and possibly as late as December. Last week’s FOMC minutes noted that there was a lengthy discussion about the possibility that the recent weakness in the economic pace may persist. A number of Fed officials suggested that the earlier impact of the dollar’s strength and weak oil prices could be longer lasting than anticipated.”
“However. Friday’s data has influenced a number of fixed income traders to consider pulling in the timing of the first Fed hike. September is still the most likely lift-off date, but July is not out of the question, particularly not if there are another couple of robust rises in core-consumer prices.”
Key Quotes
“The +0.3% month-over-month increase in core-consumer prices in April, which pushed the three-month annualized rate of core-inflation up to a four-year high of +2.6%, leaves Yellen and company with less scope to delay raising interest rates until it sees more evidence of a rebound in ‘real’ activity.”
“With the employment cost index suggesting that U.S wage growth is accelerating and the CPI indicating that underlying price inflation is rising, the Fed really cannot wait forever before beginning to raise interest rates from near zero.”
“Since the FOMC’s late April meeting, U.S. economic news has been generally mixed, keeping rate hike odds favoring a September liftoff and possibly as late as December. Last week’s FOMC minutes noted that there was a lengthy discussion about the possibility that the recent weakness in the economic pace may persist. A number of Fed officials suggested that the earlier impact of the dollar’s strength and weak oil prices could be longer lasting than anticipated.”
“However. Friday’s data has influenced a number of fixed income traders to consider pulling in the timing of the first Fed hike. September is still the most likely lift-off date, but July is not out of the question, particularly not if there are another couple of robust rises in core-consumer prices.”