“Nevertheless, with inflation continuing to miss to the downside, the case for caution remains strong”. US consumer inflation is forecast at zero month on month for July, down from 0.2 percent in June, and annual headline inflation is also expected to slow amid lower oil prices.
Advertisement
THE rand was firmer against the dollar on Monday afternoon after the greenback weakened, as investors expected no interest-rate increase by the US Federal Reserve before the US presidential election.
The so-called core CPI, which strips out the volatile food and energy components, edged up 0.1 percent in July.
Continued expectations of low interest rates have helped stocks rise to record highs, with the S&P 500 index notching 10 all-time closing highs so far this year.
The Fed has a 2 percent inflation target and tracks an inflation measure which has been stuck at 1.6 percent since March.
Williams floated two monetary policy changes to cope with lower rates: raising the Fed’s current 2-percent inflation goal, or replacing its current inflation-targeting regime with some form of nominal GDP targeting.
That in turn is keeping interest rates from rising as far or as fast as in the past; Williams on Monday estimated USA short-term rates would likely rise only to 3 percent or 3.5 percent even after the economy regains full health, and perhaps not even that.
New York Federal Reserve Bank President William Dudley said a rate hike in September was possible, while Atlanta Fed President Dennis Lockhart said the United States economy is likely strong enough for at least one rate increase before the end of 2016, with two a possibility.
In response, the dollar rose against peers and longer-dated Treasury yields slipped while stocks traded lower – signs that markets thought a rate hike could come sooner than expected.
“We have Fed minutes coming out in the middle of the week, which is likely to tell us what the Fed’s thinking is going into the second half of the year, when it probably going to come under pressure to raise rates”, said Mitsubishi Corp strategist Jonathan Butler. It had risen by 0.2 percent in the previous three consecutive months.
There were also increases in the costs of hospital services, doctor visits and prescription medicine. Owners’ equivalent rent of primary residence jumped 0.3 percent after increasing by the same margin in June.
In July, gasoline prices fell 4.7 percent, the first drop since February, reflecting renewed declines in crude oil prices. The Nasdaq composite fell 25 points, or 0.5 percent, to 5,237. Apparel prices were unchanged for the month to give a 0.3% annual increase. Sterling, which has fallen since the Bank of England announced a package of policy easing last week, fell 0.1 percent at $1.2924, its lowest since July 11. Prices for prescription medicine shot up 0.9 percent. Warmer-than-usual weather boosted utilities production by 2.1 percent while mining output increased 0.7 percent.
USA crude settled up $1 at $44.49 after touching its highest level since July 22 at $44.60 per barrel. The market hasn’t made many big moves over the last month.
Advertisement
With the housing market on solid ground, home improvement retailers are also getting a boost.
