US inflation remains persistent

Source: Dukascopy Bank SA


The United States Bureau of Labor Statistics has just published the monthly Producer Price Index data. Prices for goods at the wholesale level have grown stunningly.

The monthly increase in the PPI is at 0.3% and the Core PPI at 0.5%. Both were expected to increase just 0.1%. The producer price increase indicates that inflation is set to continue to grow at the consumer level, as the whole seller price surge will eventually result in an increase at the consumer level.

These news caused a surge of the US Dollar. The surge is caused by the fact that the fight against inflation is not over. The US Federal Reserve cannot cut Dollar interest rates. Moreover, the rising inflation signals that rate hikes could be a possibility. Higher interest rates mean higher demand for US bonds and money market investment solution that use the rate as a base.

Note that this week, on Tuesday, the Consumer Price Index revealed that prices had grown more than expected. The annual inflation was revealed to be at 3.1% instead of expected 2.9%. Monthly increase was 0.3% not the forecast 0.2%. Meanwhile, Core Consumer Price Index that excludes food and energy showed an increase of 0.4% instead of market consensus expectation of 0.3%.
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