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US economy – Rising inflation makes US interest rate rise more likely News

Thursday, September 14th, 2017 | Economy

Driven by higher fuel prices, consumer prices in August rose by 1.9 percent compared to the previous month, as the Ministry of Labor announced on Thursday. In July, inflation was still 1.7 percent. "A higher inflation makes a faster tightening of monetary policy by the Fed more likely," said fund manager Thomas Altmann from the asset manager QC Partners.
On Wednesday of next week, the currency chiefs of Fed chief Janet Yellen decide on interest rates and the reduction of their billion-strong securities holdings, which they have accumulated in the past crisis years to stabilize the economy. In view of the ongoing economic situation, the monetary authorities have already tightened twice this year – most recently in June: since then, the key interest rate has ranged between 1.0 and 1.25 percent.
Increase this year
The Fed has signaled a further increase later this year. According to economist Harm Bandholz from UniCredit Bank, the rising inflation for confidence among the monetary authorities should ensure that they are on their way to reaching their inflation target. "This is an increase in interest rates in December," emphasized Bandholz. Investors estimated this to be just under 51 percent. Before the inflation data were published, it was only 41 percent.
In addition to full employment, the Fed is targeting inflation of two percent. Monetary managers pay particular attention to price changes in consumer spending, but exclude energy and food costs. This tax indicator stood at 1.4 percent in July, well below the Fed target.
(Reuters)

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