US: Stable inflation gives the Fed flexibility to respond to trade risks - RBC
|Josh Nye, senior economist at the Royal Bank of Canada, notes that the both headline and core CPI of the US rose 0.1% in May.
Key Quotes
“Headline inflation slowed to 1.8% year-over-year and core dipped to 2.0%; both were a tick below consensus.”
“Core CPI inflation has been within 0.4 ppts of the 2% mark since 2011. The PCE deflator, the Fed’s preferred price measure, has been a few ticks lower on average and stood at 1.6% in April.”
“Today’s inflation report keeps the Fed’s options open. With the US economy showing few signs of inflationary pressure (at least from a consumer price standpoint), the central bank has leeway to respond to any slowdown in growth caused by tariffs and trade policy uncertainty.”
“Further escalation of the US-China trade dispute would increase the likelihood of a pre-emptive move from the Fed. Markets don’t appear to have high hopes for a potential Trump-Xi meeting, fully discounting a rate cut at the Fed’s July meeting and pricing in another move by October.”
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.