US Inflation CPI Analysis: Inflation cold enough for the Fed to hold, US Dollar set to fall
Premium |Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Don't miss out on experts' top articles.
Start your subscription and get access to all our original articles.
Subscribe to Premium- US inflation is decelerating at a stubbornly slow pace.
- The Federal Reserve is set to leave rates unchanged for the first time in over a year.
- Fresh tightening depends on new data, the Greenback may fall.
It could have been lower, that is what many Americans may think about the current level of inflation, which remains above average. However, for the Federal Reserve (Fed), it means no chance of a rate hike on Wednesday. That is what markets care about.
The headline Consumer Price Index (CPI) rose by only 0.1% in May, and year over year, inflation is up 4%, down from 4.9%. These figures come into the spotlight as Core CPI – price rises excluding energy and food – came out bang on estimates. Underlying inflation is up 0.4% MoM and 5.3% YoY.
Will this CPI report impact the Fed's dot plot? Some hawkish members may feel vindicated about their calls to continue raising rates, and they might push their projections for interest rates to rise. However, it is essential to note that there is still time until the July decision – and even more time until December. The dot plot refers to rates at the end of the year.
Markets have reacted with a jittery response to the figures due to their high importance and the timing ahead of the Fed. The bank's "blackout period" before their meeting also angers investors.
I expect the US Dollar to edge lower, and for Gold and stocks to rally as time passes, there is no indication of a last-minute decision to raise rates. A tweet from "Fed insider" Nick Timiraos regarding the data is unlikely to include such a hint. Under these conditions, markets will likely remain calm and wait for the dot plot and Fed Chair Jerome Powell. There is no reason to panic – at least not yet.
- US inflation is decelerating at a stubbornly slow pace.
- The Federal Reserve is set to leave rates unchanged for the first time in over a year.
- Fresh tightening depends on new data, the Greenback may fall.
It could have been lower, that is what many Americans may think about the current level of inflation, which remains above average. However, for the Federal Reserve (Fed), it means no chance of a rate hike on Wednesday. That is what markets care about.
The headline Consumer Price Index (CPI) rose by only 0.1% in May, and year over year, inflation is up 4%, down from 4.9%. These figures come into the spotlight as Core CPI – price rises excluding energy and food – came out bang on estimates. Underlying inflation is up 0.4% MoM and 5.3% YoY.
Will this CPI report impact the Fed's dot plot? Some hawkish members may feel vindicated about their calls to continue raising rates, and they might push their projections for interest rates to rise. However, it is essential to note that there is still time until the July decision – and even more time until December. The dot plot refers to rates at the end of the year.
Markets have reacted with a jittery response to the figures due to their high importance and the timing ahead of the Fed. The bank's "blackout period" before their meeting also angers investors.
I expect the US Dollar to edge lower, and for Gold and stocks to rally as time passes, there is no indication of a last-minute decision to raise rates. A tweet from "Fed insider" Nick Timiraos regarding the data is unlikely to include such a hint. Under these conditions, markets will likely remain calm and wait for the dot plot and Fed Chair Jerome Powell. There is no reason to panic – at least not yet.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.