Reply #31: US inflation data supports Fed rate pause [View All]

[54anickel]

http://msnbc.msn.com/id/14359212/

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The Federal Reserve's open market committee, headed by Ben Bernanke, decided to hold the Fed Funds rate at 5.25 per cent two weeks ago after 17 consecutive hikes. The decision came amidst a slew of inflation data that came in higher than expectations, but he Fed has said that it believes slowing growth will itself help to curb inflation.

The PPI data for July suggests that inflationary pressures may be slowing, adding to the case for the Fed to maintain the pause.

"The unexpected improvement in the core PPI is a powerful fillip to those commentators and policymakers hoping that inflationary pressures may have peaked and now be on a downward trend," said economists at Sempra Metals.

The data comes after a higher than expected 0.5 per cent rise in the PPI in June, and a 0.2 per cent rise in the core producer prices.

The PPI data showed a fall thanks in part to falling prices of light motor trucks and passenger cars, civilian aircraft and mobile homes among other indicators.

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