US inflation hits the target as UK sees a dip
The Federal reserve will be happy today: inflation in the US was 0.1 per cent in July, down from 0.3 per cent in June. Importantly that puts the annual rate at two per cent, right on the money.
None of this is particularly surprising: analysts had forecast the US figures.
The Fed's monetary policy decisions are based on unemployment figures as well as inflation in the post-crisis world, but an annual rate of two per cent will make things simple. It looks like there will be no pressure on the Fed's interest rate decision due to inflation. In the UK, the latest numbers could well influence the timing.
Mads Koefoed, head of macro strategy at Saxo Bank:
There will be no inflationary pressure on FOMC chair Janet Yellen when she takes the stage at this year's Jackson Hole summit on Friday. A new report on consumer prices shows that they rose by 0.1 per cent month on month in July as expected and down from 0.3 per cent in June.Core consumer prices also rose 0.1 per cent vs. 0.2 per cent expected and 0.1 per cent prior. This translates into annual prices changes of 2 per cent and 1.9 per cent for overall and core prices, respectively (both as expected).
This has left the Fed free to leave interest rates alone as the job market continues to recover. Interest rate rises are probably looming onto the mid-term horizon; with many expecting a hike next year.
It will be interesting to see, after the UK's figures today, whether betting will shift to the US regarding which central bank will be the first to hoist rates.