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Low inflation providing a headache for US policy makers

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The FTSE has again opened flat this morning, still seemingly unable to follow Wall Street’s lead which posted further record high’s yesterday across each of its major indexes.

That may well be due to the Pound. Sterling and its Euro counterpart were the major beneficiaries of the release of last nights FOMC minutes with the Dollar in retreat as investors seeking a positive tone from policy makers, were left disappointed.

FxPro Chief Market Strategist, Edward Anderson suggested “The inflation conundrum is perplexing FOMC policy makers as they struggle to understand why the US has persistently low inflation according to the latest FOMC minutes.”

“The 2% target appears to be far off but the markets are fully expecting a rate hike in December regardless of inflation data.”

Over in the US, equity markets posted record closes across all three major indexes as the FOMC all but confirmed a December US rate hike, despite the concerns about subdued inflation. Accendo Markets analyst, Mike van Dulken noted “The Dow Jones and S&P 500 both finished 0.2% higher at new all-time bests thanks to strength for Johnson & Johnson and McDonald’s on the former, while Real Estate led the latter, while the Tech-focused Nasdaq outperformed, closing up 0.25%.”

This afternoon, the US PPI release will provide investors with the latest US inflation data. Edward Anderson added “The markets will be keenly watching for today’s US PPI to ascertain if there is a degree of inflationary pressure.”

“Annualized PPI of >2.5% will help sway those FOMC policy makers that have been reluctant to commit to a year end rate hike.”

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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