U.S. inflation slips unexpectedly in August, Fed to keep low rates for "considerable time"

Consumer price index in the United States declined surprisingly to 1.7% on the annual basis in August, while month-on-month prices were down 0.2%. Excluding food and energy, monthly inflation was equal to zero. Therefore, the Fed target of 2% is becoming even less realistic to reach in the nearest future. At the same time, analysts admit a negative impact of falling energy prices, as they limit the overall rise in prices. It poses some difficulties for the Federal Reserve, which held the monthly session during past two days. Among main points, the FOMC decided to taper QE even further, by cutting mortgage backed securities' purchases to $5 billion and bond buying to $10 billion. The main interest rate was kept at 0-0.25% level. Meanwhile, Janet Yellen confirmed that very low interest rates will remain in place for a long period of time, taking into account the previously mentioned dropping inflation. Some attention was paid to the labour market, as the Fed assumes that it still has a potential to recover even more before raising interest rates.

Additionally, current account in the world's largest economy rebounded, by posting the less-than-predicted deficit in the second quarter. It reached $98.51 billion versus $102.11 billion in January-March, while economists expected the negative gap to widen. The decrease was mainly caused by falling shortfall on secondary income, as it was the smallest since 2006 at $21.4 billion.