US Fed Seen As Inflation Complacent

How worried should we be by rising US inflation? Not at all, according to Janet Yellen. The chairman of the Federal Reserve appears blissfully unconcerned at the upward trend in America’s cost of living. Quizzed about it last week, the woman who runs the world’s most powerful central bank said it was a case of the recent data being “noisy”.

This insouciance may come back to haunt Yellen. She may be right, but there are three good reasons why rising inflation is worth taking more seriously than it is by the Fed.

The first is that it is not just inflation as measured by the consumer prices index that is going up. It is inflation as measured by the producer prices index, as measured by the personal consumer expenditure deflator (the yardstick of choice for the Fed), as measured by the monthly survey of small businesses, and as measured by the Institute of Supply Management. The latter was out yesterday and showed that industry was paying more for its fuel and raw materials and charging more for goods leaving factory gates. If this a case of noise, there’s one heck of a din out there.

The second reason to care about inflation is that the US economy is bouncing back from its weather-induced soft spot in early 2014. Output is going up and unemployment is coming down. Recovery from the deep recession of 2008 is still incomplete, but output is already well above its previous peak. In the UK that milestone has only just been reached.

via The Guardian

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza