One of the reasons the Fed has justified cutting interest rates is the lack of inflationary pressures in the domestic economy. Indeed, core PCE has averaged just 1.6% over the past decade, below the Fed’s 2% target.
The January CPI report, released earlier this week, showed only a modest increase in consumer prices. The year-over-year rate of headline inflation decelerated to 1.6%.
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At its July meeting, the U.S Federal Reserve (the Fed) cut rates for the first time since December 2008.
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This bulletin, written by Dr. David Kelly, addresses the impact that deflationary fears have had on the Fed's decision to postpone rate hikes.
The performance of the US dollar significantly diverged from relative rate spreads.
The performance of the US dollar significantly diverged from relative rate spreads