NEW YORK, Aug 16 (Reuters) – The U.S. dollar hit its lowest levels in more than seven weeks against the euro, yen and Swiss franc on Tuesday a day after dovish comments from a top Federal Reserve official, but pared losses after remarks from the head of the New York Fed raised expectations for a rate hike this year.
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On Tuesday morning, the U.S. Bureau of Labor Statistics said its Consumer Price Index remained flat in July, in line with consensus forecasts, falling back slightly from a monthly gain of 0.2% in June. In the 12 months through July, the CPI rose 0.8 percent after increasing 1.0 percent in June. It had risen by 0.2 percent in each of the previous three consecutive months.
Inflation continues to fall below the Fed’s two-percent target with CPI in August unchanged and Core CPI – excluding food and energy costs – ticked up 0.1 percent, 0.2 percent gain was projected. The year-on-year core CPI increased 2.2 percent in July after advancing 2.3 percent in June. The Fed now targets a 2-percent inflation goal.
According to Fox Business Network, New York Fed President William Dudley said: “It’s possible” to hike rates at the next scheduled policy meeting on September 20-21, adding “We’ll have to see where the data falls”.
“So the weight of responsibility on the U.S. Fed grows by the day”, he said in a note, adding that he does not expect such a rise in rates “for a long, long time because of this risk”.
With the labor market perceived to be either at or near full employment, Fed officials are focused on persistently low USA inflation. The Fed raised its benchmark overnight interest rate in December for the first time in almost a decade. But Americans got some relief from gasoline prices, which dropped 4.7 percent last month, the first decline since February, reflecting renewed declines in crude oil prices. In a separate report, the Fed said industrial production shot up 0.7 percent last month after rising 0.4 percent in June.
The cost of food consumed at home fell for a third straight month, with prices for meat, eggs, dairy and cereals declining.
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The continued possibility of a September rate rise may well rest on CPI, and require it to beat expectations, but most analysts are now arguing about the viability of a December rise instead.
