FXstreet.com (Barcelona) - The US consumer price index, a key indicator of inflation, met with expert forecasts as the monthly rate fell to 0.1% for December, down from 0.4% in November. The market had expected a slightly smaller drop to 0.2%. This result reverses two months of price increases.
In annual terms, however, the CPI for December grew to 2.7%, up from 1.7 in November and very close to market predictions of 2.8%.
December marks the fifth straight month of price increases in yearly terms. Combined with other data indicating that inflation is heating up such as the recent rise of gas and import prices, the steady growth in the CPI thus heightens the possibility that the Federal Reserve will take notice to stay ahead of inflation, analysts say.
Triffany Hammond, of TrifFX says that the growth in the CPI is no surprise, but, even so, as a red flag for inflation it may trigger a response from the Federal Reserve soon. How soon is soon will be the question.
While the Federal Reserve is benefiting from a relatively cheap USD right now, it will be forced to respond to the data, not only as measure of keeping inflation in check, which would mean a rise in interest rates, but also as a perception enhancing tool for the global economy, therefore global investors, she said.