US Inflation Rate Remains Steady at 2.7% in December
The United States had an annual inflation rate of 2.7% in December, as tracked by the Consumer Price Index (CPI), matching November’s increase, the US Bureau of Labor Statistics (BLS) reported on Tuesday. These figures matched the market forecast. The core Consumer Price Index, excluding fluctuating food and energy costs, increased by 2.6% in the same month, down from November’s 2.7% rise. Monthly, the CPI and core CPI rose by 0.3% and 0.2%, respectively.
The index for shelter rose 0.4 percent in December and was the largest factor in the all items monthly increase. The food index increased 0.7 percent over the month as did the food at home index and the food away from home index. The index for energy rose 0.3 percent in December. The selling momentum in the US Dollar (USD) now gathers traction, prompting the US Dollar Index (DXY) to breach below the key 99.00 barrier amid declining US yields across the curve.
Market Reaction to US CPI Inflation Data
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen. The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.02% | -0.13% | 0.32% | -0.06% | -0.06% | -0.13% | 0.06% | |
| EUR | 0.02% | -0.10% | 0.39% | -0.04% | -0.05% | -0.12% | 0.08% | |
| GBP | 0.13% | 0.10% | 0.45% | 0.06% | 0.06% | -0.01% | 0.18% | |
| JPY | -0.32% | -0.39% | -0.45% | -0.43% | -0.43% | -0.51% | -0.31% | |
| CAD | 0.06% | 0.04% | -0.06% | 0.43% | 0.00% | -0.07% | 0.12% | |
| AUD | 0.06% | 0.05% | -0.06% | 0.43% | -0.00% | -0.07% | 0.13% | |
| NZD | 0.13% | 0.12% | 0.01% | 0.51% | 0.07% | 0.07% | 0.19% | |
| CHF | -0.06% | -0.08% | -0.18% | 0.31% | -0.12% | -0.13% | -0.19% |
What to Expect in the Next CPI Data Report
Inflation itself isn’t expected to spring many surprises. Headline CPI is seen rising 2.7% YoY in December, unchanged from the previous month. Strip out the more volatile food and energy components, and the picture is much the same: core inflation is forecast to edge up slightly to 2.7% from 2.6%, still uncomfortably above the Fed’s target. On a monthly basis, both headline and core CPI are expected to come in at a fairly steady 0.3%, reinforcing the idea of inflation that’s easing only slowly rather than rolling over.
How Could the US Consumer Price Index Report Affect EUR/USD?
Investors are still chewing over a mixed set of signals from December’s Nonfarm Payrolls (NFP), but that debate is starting to take a back seat. Fresh threats to the Fed’s independence have resurfaced, and they risk overshadowing the significance of Tuesday’s inflation data altogether. Given that the Fed is still keeping a close eye on the labour market, December’s CPI numbers are unlikely to change the policy picture in any meaningful way, unless inflation throws up a genuine surprise, one way or the other.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
Smart Tip for Readers
To stay up-to-date with the latest inflation data and its impact on the US Dollar, consider setting up a news alert for CPI reports and Fed meetings. This will help you stay informed and make more informed decisions about your investments or financial plans. You can find more information about the US Consumer Price Index (CPI) data Here
