- Vassili Serebriakov, foreign-exchange strategist at BNP Paribas SA
Consumer prices across the US rose more than expected on a monthly basis in September. However, with the inflationary pressure still remaining subdued, the Fed is unlikely to be in a hurry to raise interest rates. The consumer price index inched higher 0.1%, the US Department of Labor said, after a surprising decline of 0.2% recorded in August. Analysts, however, expected a flat reading. On an annual basis, consumer prices rose 1.7% in September, overshooting expectations for a 1.6% reading. Core CPI, which is considered to be a better gauge of long-run inflationary pressures as it strips out volatile food and energy costs, climbed by a seasonally adjusted 0.1% in September versus expectations for a 0.2% gain, while on year the gauge rose 1.7%, unchanged from August.
The Federal Reserve targets 2% inflation. However, inflation has cooled in recent months after accelerating in the second quarter, in as a strengthening US Dollar and slower economic growth in China and the Euro zone sap imported price pressures. Weak inflation and a recent global market sell-off could provide the central bank with ample room to maintain benchmark overnight interest rate on hold, which it has kept near zero since December 2008. Analysts now expect the first interest rate hike in the fourth quarter of 2015 instead of the second quarter. EUR/USD was trading at 1.2668 following the data release, from 1.2699 ahead of the report, while GBP/USD was at 1.6038, compared to 1.6063 earlier.
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