This year the word inflation may be considered the word of the year. It looks like it might not lose its popularity as the year comes to an end, and still, the phenomenon of rising prices in the economy may arouse great interest. Today we will learn the inflation rate for the United States, on which further decisions of the Federal Reserve on interest rates may depend.
The above decisions may in turn affect the behavior of the U.S. dollar, stock market indices or commodities. According to the tradingeconomics website, the annual inflation rate in the US may retreat to 8% in October from the 8.2% recorded the previous month. Core inflation is also possible to fall to 6.5% from a 40-year peak of 6.6%, according to market consensus. At the same time, it seems expected that the monthly inflation rate could accelerate to 0.6% in October from 0.4% in September, as gasoline prices rose for the first time in four months. U.S. inflation was recorded at 8.2% in September, the lowest in seven months, compared to 8.3% in August.
What are Fed officials saying?
U.S. Federal Reserve Bank of Richmond President Tom Barkin shared on Wednesday that if the central bank decided to retreat due to "fear of a slowdown, inflation would come back even stronger." Barkin stressed that while the Fed's current monetary policy path could lead to a slowdown, as the central bank aims to bring "supply and demand back into balance" and pull inflation down to 2%, BBN reported.
Meanwhile, Federal Reserve Bank of Minneapolis President Neel Kashkari said discussion of a pivot in current Fed monetary policy is "completely premature." He said that the central bank's dual mandate of keeping inflation at 2% and maximizing employment will encounter problems "at some point," but that moment is "very far away." Kashkari stressed that wages are not driving inflation, but rather trying to catch up with it. He expressed regret that the Fed did not start raising interest rates earlier, but noted that inflation will continue to be high due to external factors, according to the BBN release.
Dollar exchange rate ahead of inflation data
Source: Conotoxia MT5, EURUSD, Daily
The EUR/USD pair's exchange rate seems to be consolidating at the 1.0000 level ahead of the release of US inflation data. This could be a potential resistance level, the overcoming of which could lead to a possible appreciation of the euro towards 1.0300. However, for this to happen, it is possible that the inflation data would have to be slightly weaker than market expectations. Meanwhile, potential support could be in the region of 0.9750. The inflation data will be published today at 14:30 GMT+1.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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