Inflation is as stable as it could be, at least when looking at the figure the Fed loves most. The Core Personal Consumption Expenditure Index stand at 1.6% year over year in June. This is exactly as expected. Month over month, core prices rose 0.1% as expected after +0.2% last time.
The dollar doesn’t really like it and slides across the board. The fall is not huge, but ranges are certainly extended. USD/JPY further falls after Japan presented the stimulus package, GBP/USD further recovers after an OK PMI. Even EUR/USD tops 1.12. And it’s a very frustrating pair.
Other figures show minor and offsetting surprises. Personal spending is up 0.4% m/m, better than 0.3% expected. Personal income is trailing with a rise of 0.2% against 0.3% expected. All in all, these are stable figures.
While inflation is OK, it is still below the Fed’s 2% target and is not heating up. This mandate used to worry the Fed and now it has become boring. The other part of the Fed’s duty, the jobs mandate, has been a bit more wild of late, with a leap of 287K jobs in June hardly covering for two terrible months beforehand.
We get the July Non-Farm Payrolls report on Friday. In any case, poor growth and a hesitant Fed mean that we will need much more on both fronts in order to convince Yellen and co. to make the second hike.
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