The market's focus has momentarily shifted back to the Fed and the future path of short-term interest rates. The Fed will end their two-day meeting today and release a statement later this afternoon. In the meantime, we can speculate on their actions and the market's response by looking at some of the data released today.
The first thing to note is that the Consumer Price Index (CPI) fell by the largest amount since December of 2008. The headline figure declined by a seasonally adjusted 0.3%, while the "core" rate (excluding food and energy) rose by 0.1%. Over the last twelve months consumer prices have risen by an unadjusted 1.3%
A significant decline in the CPI was to be expected considering the massive plunge in oil, but recall that the Fed is much more interested in the core rate when it comes to setting policy. Monetary policy should be inertial in nature and not ... Log in or subscribe to continue reading.