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.
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.