Analysts at CIBC, explained that inflation hasn’t been persistently high for a long time in the United States, such a scenario could weigh on the US dollar considering recent comments from Fed’s Chair Powell.
“The Fed’s statement and projections didn’t move markets too much. However, Chairman Powell’s remark that they would need to see a “significant, persistent” rise in inflation before hiking interest rates did move markets. The reason? Well, we haven’t seen that for a while. Assuming significant means above 2.5% and persistent means longer than 6 months, we haven’t seen that sort of inflationary pressure even on headline measures since 2012.”
“The Fed’s preferred measure of core PCE hasn’t seen a sustained run above 2.5% since the early 1990’s! We don’t necessarily think that the Fed need’s to see that before hiking, but Powell’s remarks justify our call for no hike in 2020 (even if trade uncertainties ease) and for broad US$ weakness.”
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.