"Prices have only gone down because nobody has any money to buy stuff. It's all about supply and demand. "
- Antonio Duarte, a retired postal worker
The world's largest economy has been reporting weak data from practically all sectors of the economy, including labour and housing markets. Nevertheless, the Fed has expressed only hawkish comments, saying they will start raising interest rate as soon as the unemployment hits 6.5%, citing broadening economic recovery.
The Federal Reserve also mentioned the inflation rate should fluctuate around a healthy 2% level. Thursday's report showed the core measure of inflation, which strips out volatile food and energy prices came in flat in January at 0.1% month-on-month, the same as in the preceding month and fully in line with market projections. The Bureau of Labor Statistics also said the core CPI rose 1.6% on a yearly basis, decelerating from 1.7% a month earlier. The overall CPI slowed down as well, coming in line with analysts' forecasts. Data from the labour market indicated initial jobless claims fell 3,000 to 336,000 last week, falling short of experts' estimations for 335,000 figure. The less-volatile four-week moving average eased to 338,500, falling 1,750 over the period.
Persistently weak inflation could see the Fed keeping its key refinancing rate around zero for a while even as policymaker dials back its monetary stimulus. Additionally, November's and December's retail sales were revised down pointing to a much slower pace of consumer spending– largest part of the economy.
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