US Federal Reserve boss Jerome Powell
(Picture: REUTERS)The rate of inflation in America edged downwards last month from 6.5 per cent to 6.4 per cent.
The smaller than expected fall increased the pressure on the US Federal Reserve headed by Jerome Powell to further increase US interest rates. Forecasters had been expecting the Consumer Prices Index to drop to 6.2%
US inflation peaked at 9.1 per cent in June but has been steadily falling ever since.
Today’s “disappointing” data from the US Bureau of Labor Statistics showed core CPI, which excludes volatile food and energy prices, also fell slightly to 5.6% from 5.7%. On a monthly basis, CPI rose to to 0.5% compared 0.1% previously.
The Fed increased its benchmark interest rate by a quarter of a percentage point earlier this month to its highest level since September 2007.
Britain’s inflation has been much slower to fall. Tomorrow the Office for National Statistics is expected to show that the Consumer Prices Index (CPI) dropped only from 10..5% to 10.2% last month.
Neal Keane, Head of Sales Trading at the international brokerage ADSS, said: “US CPI holding relatively flat at 6.4% shows that the Fed’s fight against inflation has met some headwinds as it tries to move closer towards its 2% inflation target.”
This report, combined with the booming jobs market, will certainly raise questions at the Fed’s Monetary Committee meeting next month. Current expectation is for another 25 basis points raise in interest rates - given their signal that the fight with inflation is far from over - higher increases than 25 bps cannot be ruled out.”
“Markets will reassess recent peak inflation themes, and with more strong US data likely to force the Fed to continue to hike rates for longer, we can expect further stock market weakness, a stronger dollar, and weaker commodities.”
