Published: Fri, February 17, 2017
Technology | By Timothy Carter

Dollar Gains More Ground as Traders Eye CPI

Dollar Gains More Ground as Traders Eye CPI

Inflation has hit its highest level in more than two years, mainly as a result of rising fuel prices.

They also noted that separate figures released overnight showed that private-sector U.S. workers suffered a 0.4 per cent decline in their inflation-adjusted weekly earnings in January from a month earlier.

The Consumer Prices Index rose by 1.8% in the year to January 2017, up from 1.6% in the year to December 2016, according to the latest ONS statistics.

However, RBI governor Urjit Patel on Saturday denied that RBI has shifted from its mandate of looking at the overall consumer price index (CPI) number to only the core inflation (non-food, non-fuel).

CPI softened 20 basis points to 3.2 percent in January from 3.4 percent in December, primarily because of a 70 bps drop in food inflation.

Despite the acceleration in both producer and consumer price inflation in January, Larry Hu, head of China economics at Macquarie Securities in Hong Kong, doesn't think that it will be enough to see the People's Bank of China (PBoC) tighten monetary policy settings in the near-term.

The volatile trade services component, which measures changes in margins received by wholesalers and retailers, shot up 0.9% in January after being unchanged in the prior month.

Other forecasters believe it is likely to rise even higher in the coming months - going as high as 4% next year - as sterling weakness increasingly feeds through to consumer prices.

Although this is lower than many economists' expectations of a 1.9% rise in prices, it marks the third consecutive monthly inflation increase since October, with the trend expected to continue.

In January alone, food prices increased by 2.3%, led by a 3.4% jump in pork prices, a staple of the Chinese diet. The figure also matched preliminary report.

Food prices added 2.7 percent year on year in January, higher than the 2.4 percent gain in December because of the holiday effect, Sheng said.

On Tuesday, Yellen hinted more rate increases were on the way as the jobs market has improved and inflation has shown signs of nearing the Fed's 2 per cent goal. Much below this and the spectre of deflation and recession looms ominously, much above 2% and there is a risk of economic overheating and a risky inflationary spiral taking hold.

The Federal Reserve last raised the federal funds rate in December, but held its target range at 0.5-0.75 per cent at its last meeting this month.

"In the construction sector, the inflation has been driven by weak British pound affecting the price of imported materials".

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