XM Group | Feb 09, 2024 08:34AM ET
Inflation in the United States has generally been trending lower but the progress to get it all the way down to 2% has stalled in recent months, at least according to the CPI metric. Whilst Fed officials are optimistic that price measures will continue to head lower over the next few months, the resilience of the US economy is proving to be a thorn in the side of the Fed, as strong domestic demand increases the odds of inflationary pressures brewing again, particularly if there’s a significant re-acceleration in wage growth.
The consumer price index rose to 3.4% y/y in December, having been hovering above 3.0% since last July. There was somewhat better news for core CPI, which eased below 4.0% y/y for the first time since May 2021.
In the last report, one-year inflation expectations had fallen to 3.6% and two-year ones to 2.8%. Should expectations about future inflation maintain their downward path, this could undermine any fresh hawkish rhetoric from RBNZ Governor Adrian Orr when he speaks on Thursday.
Nevertheless, any downside reaction in the kiwi would likely be short lived as the RBNZ would need to see more evidence of abating inflation before turning dovish.
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