Wholesale prices blip up 0.1% in May

Andrew Cummings
June 12, 2019

On Monday Trump vented in a CNBC interview that the US central bank doesn't "listen" to him and contrasted its lack of obedience with the control that Chinese President Xi Jinping wields over the People's Bank of China. Fed Chair Jerome Powell's promise to act "as appropriate" was not meant to signal a rate cut, he said, but was merely meant to show the USA central bank was not tone deaf to rising trade tensions.

The U.S. dollar dropped sharply against a basket of currencies after the release of the data while U.S. Treasury yields fell.

But Fed Chairman Jerome Powell hinted during a speech last week that policymakers were willing to cut interest rates, depending on how global trade developments impact the US economic outlook and whether inflation remains muted. Just a few months later, the Fed has to contend with a deteriorating growth outlook as well and markets are already pricing a 100% probability that rates will be cut twice by 25 basis point each before the year is out.

The Euro-to-Dollar rate was 0.14% lower at 1.1317 Wednesday although it's risen 0.8% in the last week, which has helped the exchange rate reduce what was once a 2% 2019 loss.

It is certainly not the first time that Trump has criticized the Fed's policies.

U.S. markets witnessed good growth which accelerated higher due to comments by Jerome Powell, Chairman of Federal Reserve who stated that market and trade developments were being closely monitored by Central Bank and they will act appropriately to sustain expansion. As he is part of the voting team that sets Fed rates his comments spurred investors and market forces.

Fed Chair Jerome Powell has previously suggested - based on a separate measure known as personal consumption expenditures - that the low inflation is temporary.

USA inflation rose by 0.1% in May, down from 0.3% in April but in line with the market consensus, Bureau of Labor Statistics data shows.

The entire gain in May came from a 0.3% increase in the wholesale price of services.

-Shelter costs rose 0.2 per cent, as owners-equivalent rent, one of the categories that tracks rental prices, increased 0.3 per cent. Food prices rebounded 0.3 per cent in May after dipping 0.1 per cent in the prior month.

But prices for airline tickets, household furnishings and new vehicles rose last month. Electricity prices were down 0.8%.

The dollar index rose 0.03%, with the euro up 0.03% to $1.1315. Tweeting on Tuesday evening, Mr Trump said: "The Euro and other currencies are devalued against the dollar, putting the U.S. at a big disadvantage".

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