Despite the recent trend of commodity prices are still rising, but the latest data showed the U.S. almost no upward pressure on prices, but further declines in U.S. core inflation. Nomura Securities that, if core inflation continues to lower, the Fed began tightening policy will be difficult.
Paul Sheard, chief economist at Nomura Securities, said the daily fluctuations in commodity prices so that people always worry that inflation will accelerate again, suddenly and without any signs of rising long-term existence of a huge fiscal deficit is expected to disrupt the world economy was seen as the culprit, which to some extent also increased inflation fears. At the same time, the weak that the market prices of output goods inflation concerns are overdone, deflation is still a greater threat to price stability.
Data showed the U.S. core PPI and core CPI inflation rate has consistently shown is slowing. In February, the two core index rose 0.1% in the chain. The level of a year ago, the core PPI inflation rate seems stable at about 1% year on year, while core CPI inflation moderated to 1.3%, the highest six years, the slowest increase. Slow down even more unusual in recent months, the current 6-month core CPI growth rate of just 0.8%, slightly lower than in 2003, "the fear of deflation," when the level, and since November 1965 has been the slowest 6 month rate of price change. In the past four months, the core inflation rate has been zero.
In this regard, Nomura Securities believes that the trend of core inflation falling steadily for two shares of countercurrent cover: on the one hand, the rent increase significantly weaker; the other hand, core inflation rising commodity prices. The latter to some extent offset by the former, leading to moderate the pace of inflation control. Looking ahead, the rent increase will be the dominant trend seems weak. Rent inflation, core inflation is the most stable component of both because homeowners will not always adjust rental prices, but also because the U.S. Bureau of Labor Statistics of 6-month moving average to calculate the rent index. This stability means that inflation is likely to continue to rent today from 3 to 6 months. From a fundamental point of view, the momentum is still very weak rise in rents and real estate market, vacancy rates close to historic highs.
Meanwhile, Nomura Securities believes that the core commodity price inflation is likely to be lower. The acceleration of core goods inflation reflects two main factors: higher tobacco taxes and automobile prices rose. In 2008 when gasoline prices rose to more than 4 U.S. dollars / gallon, the car prices plummeted. Models focus on price cuts SUV, passenger and pickup, once established will not continue to higher gasoline prices, the price of an immediate recovery of these models. Current vehicle prices were returned to the level before the impact of oil prices. So car prices will stabilize at current levels.
Federal Open Market Committee (FOMC) is also expected core inflation will not slow down significantly. The core PCE (personal consumption expenditure) index of the main trend is expected at 1.0% in 2011? Range of 1.9%, 1.2% in 2012? Between 1.9%. Currently, the Fed's view is consistent with the market basically: Despite high unemployment, but core inflation is relatively stable. If there is no further significant decline in core inflation, the Fed may raise interest rates this year. However, if core inflation continues to lower, the Fed began tightening policy will be difficult.
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