The dollar fell after the release of data on consumer inflation in the United States. The growth rate of basic inflation was lower than expected, which reduced the risks of a rapid curtailment of QE programs. According to the US Department of Labor, the consumer price index (CPI) in July increased by 5.4% compared to the same period of the previous year, remaining at the same level as in June, when annual inflation peaked since 2008. Compared to the previous month, CPI rose 0.5% in July after rising 0.9% in June, which coincided with expectations.
Basic consumer price index excluding food and energy prices, rose 0.3% mom in July, which was below the forecast 0.4%. The sharp acceleration of inflation in the United States, due to the recovery in economic activity after easing coronavirus restrictions, is on the decline, writes DJ Newswires.
“Basic inflation has probably already peaked, but we still doubt that the fall in price growth will be fast enough to meet the hopes of Fed executives,” Capital Economics said.
The CapEcon expects that prices for used cars in August will fall and make a negative contribution to the rate of basic inflation. US Fed executives called accelerating inflation a temporary phenomenon and repeatedly signaled that the central bank will not raise interest rates until 2023. Published data can be considered as confirmation of their statements. But it is too early to talk about the disappearance of the risk of a longer period of increased price growth, Capital Economics notes.
“Easing inflation may resume discussions that the Fed should not rush to roll back stimulus. And this can start a new reversal of the dollar to a decrease, “said a team of analysts at FxPro.