US Imports Prices Drop 2.8% in January

The lower price of U.S. imports will keep inflation below the Federal Reserve’s target as the strong USD and the lower price of Oil continue to widen the trade deficit.

U.S. import prices recorded their biggest drop in six years in January as the cost of petroleum and a range of other goods fell, a sign that domestic inflation pressures could remain muted for a while.

The Labor Department said on Friday import prices tumbled 2.8 percent last month, the largest decline since December 2008, after sliding by a revised 1.9 percent in December. It was the seventh straight month of declines in import prices.

Economists polled by Reuters had forecast import prices falling 3.2 percent last month after a previously reported 2.5 percent drop in December.

In the 12 months through January prices declined 8.0 percent, the largest year-on-year drop since September 2009.

Crude oil prices have plunged nearly 60 percent since June as increased shale production in the United State and weak global demand caused a glut on the market.

At the same time, the dollar has strengthened significantly against the currencies of the country’s main trading partners, helping to pull inflation further away from the Federal Reserve’s 2 percent target.

via Reuters

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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