Saturday, April 4, 2015

Economic Summary for the week ended 30th March 2015

The dollar’s sharp increase on a trade weighted basis over the last year implies lower economic growth in the coming quarters via weaker export growth. But, the US Federal Reserve may be more concerned with the impact on prices, as consumers may choose to swap domestically produced goods for cheaper foreign imports, further weighing on prices and with a potential knock on effect to wage growth. The Fed’s preferred measure of inflation, personal consumption expenditure, exhibits a close relationship with consumer import prices as shown in this week’s chart. Central banks usually treat currency movements as transitory, but with the inflation rate already at zero the greenback is going to come under closer scrutiny.

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