Daily Forex Fundamentals | Written by DailyFX | Jul 16 08 13:23 GMT |
Consumer prices in the US surged significantly more than expected in June, as the Labor Department's index jumped 1.1 percent during the month, bringing the annual rate up to a more than 17 year high of 5.0 percent. Unsurprisingly, a breakdown of the report shows that energy prices were responsible for the bulk of the rise, as they gained 6.6 percent from a month ago and 24.7 percent from a year earlier, while food costs rose 0.8 percent.
What may be most disconcerting to the Federal Reserve, however, was the unexpected increase in core CPI of 0.3 percent during the month and 2.4 percent from a year earlier. As Federal Reserve Chairman Ben Bernanke noted yesterday that "the currently high level of inflation, if sustained, might lead the public to revise up its expectations for longer-term inflation." Nevertheless, the central bank is unlikely to raise interest rates in response due to the looming downside risks to growth and unstable conditions in the financial sector.
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