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US Dollar Declines Following Inflation Figures; The Fed Will Meet Next Week

Federal Reserve rate inflation
Economists expect the Fed's preferred inflation gauge, set to be released on Friday, to decline from 3.8% in May to 3% in June, bringing it close to the central bank's 2% target rate. (PHOTO: ETF Database)

The Federal Reserve should continue to drop interest rates by the middle of the year, as evidenced by data showing that inflation increased somewhat in December but was going lower on Friday. This led to a slight decline in the value of the US dollar.

Increase In Inflation

Before the weekend and as investors prepared for a plethora of significant U.S. economic data the following week, including the January non-farm payrolls and major events like the Federal Open Market Committee meeting and the Treasury’s refunding statement, volume began to decline in the afternoon. The latter will list the amount of borrowing that the US government needs for the next quarter.

The dollar was expected to register gains for four weeks in a row during the week. At 103.41, the dollar index saw a 0.1% decline last time.

According to data, following an unrevised 0.1% decline in November, the personal consumption expenditures (PCE) price index grew by 0.2% last month. The PCE price index grew 2.6% in the year ending in December, which was in line with November’s unrevised growth. These figures were consistent with assumptions held by most.

Monetary Policy

Dollar

Source- Forbes

For the third consecutive month, the annual rate of inflation was less than 3%. In order to meet its 2% inflation target, the Fed monitors the PCE price indicator.

Prior to the Federal Reserve’s upcoming policy announcement on January 31, currency analysts at MUFG stated in a report that the United States economic statistics painted a mixed picture for monetary policy.

After hitting a six-week low earlier in the morning due to a survey revealing lower-than-expected German consumer morale, the euro was up 0.1% at $1.0856.

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