Consumer Price Index Released in America

Alan Penny

11 December 2019

3 min read

dollar bills and pennies

  • Consumer Price Index month over month better
  • Core Consumer Price Index month over month as expected
  • Inflation still very low

Early during the Wednesday session, the Americans released the Consumer Price Index figures month over month, and they came out in a mixed bag. However both of these versions of the US CPI are still doubly low, and that should continue to drive expectations coming out of the Federal Reserve.

The US CPI figures

The Consumer Price Index figure came out month over month at a gain of 0.3%, better than the 0.2% expected. While this is relatively positive, CPI running at 0.3% is not enough to have the Federal Reserve jumping in and doing anything drastic. Furthermore, the Core Consumer Price Index month over month came out at 0.2%, as expected. In other words, there will be no rush for the Federal Reserve to come in and start raising rates based upon inflation.

the United States is probably looking at extraordinarily low rates for the foreseeable future

This was never a major concern, but a huge surprise to the upside might have people looking towards the Federal Reserve for its next few words. Ultimately, this is an indication that the United States is probably looking at extraordinarily low rates for the foreseeable future. This is something that should be good for risk appetite, indicating that in order to have any type of yield at all moves will have to be made out of the risk spectrum.

The United States going forward

Going forward, the United States should continue to be the favored place to put money, simply because of the lack of strength that is being displayed everywhere else. While the United States dollar isn’t bolstered by interest rate hikes from its own central bank, the reality is that so many other server banks around the world are employing loose monetary policy, that it won’t matter. It simply  is the “best one of the bunch.”

While the European Central Bank and the Bank of England both look very likely to be loose for the foreseeable future, and the Bank of Japan being habitually loose, this should continue to favor the US dollar in general, if nothing else by de facto.

With this, the US dollar should remain strong and equity flow into the United States should continue. After all, the United States has one of the better performing economies around the world and it is not showing any real signs of slowing down, at least not below trend.

Yes, the US had been growing above trend for a while, but that was mainly due to tax-cut infusions into the economy. As long as other places around the world struggle it makes sense that the United States continues to be the first place investors look to put money to work. This means higher stock prices and a stronger greenback as well. This is setting 2020 up to look very much like 2019 did, although some value hunters will be looking towards the European Union.

Written By
Alan Penny

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