PA ANALYSIS: Weak inflation casts uncertainty over USA rate rises

16 July, 2017, 01:17 | Author: Yolanda Murray
  • Federal Reserve Chair Janet Yellen tours Daley College in Chicago  Monday March 31 2014.   AP Images

In early trading, USA 10-year yield fell to 2.308 percent, from 2.331 percent before the data.

In a separate report, the Commerce Department said retail sales fell 0.2 per cent last month, weighed down by declines in receipts at service stations, clothing stores and supermarkets.

As Societe Generale strategist Kit Juckes told Bloomberg: "If we trundle along with the current level of inflation, the Fed won't stop slowly raising rates, but they won't be in any hurry".

Their implied view fell to 47 percent shortly after the release of the latest CPI and retail sales data. The Russell 2000 index of smaller-company stocks inched up 0.1 percent to 1,425.66.

The Fed's preferred measure of inflation has been slipping.   Andy Kiersz  Business Insider
The Fed's preferred measure of inflation has been slipping. Andy Kiersz Business Insider

Just last month, the US central bank raised interest rates for a second time in 2017, downplaying the weakening in price growth amid one-time factors. The Australian dollar rose 1.22 percent to $0.7823, well on track to post its best weekly performance in four months.

Weak auto sales, which have been down in the first half of 2017, were not to blame this time: excluding that volatile category, sales were still down 0.2 percent.

Asian shares steadied on Wednesday after Wall Street managed to weather a fresh twist in the political controversy surrounding U.S. President Donald Trump's administration, while investors looked ahead to Federal Reserve Chair Janet Yellen's comments later in the day.

Ahead of Fed Chair Yellen's testimony to Congress on the state of the US economy from 1400 GMT, two of her colleagues cited low wage growth and muted inflation as reasons for caution on further interest rate increases. That followed a report that the European Central Bank is likely to signal in September that its asset purchase programme will be gradually wound down next year.

U.S. generals warn Trump against scrapping Iran nuclear deal
Zarif noted that Iran's expectation at the current stage was to see the compliance of all sides of the agreement to the deal, something which has been violated by the USA , according to Zarif.

The kiwi was battered early in the week by disappointing domestic data but gained sharply toward the end of the week amid speculation the Reserve Bank may be more inclined to hike interest rates in the face of increases and bullish talk from other central banks including the Bank of Canada.

The Dow Jones Industrial Average .DJI rose 84.65 points, or 0.39 percent, to 21,637.74.

But Dr Yellen added that monetary policy was not on a preset course, and that the Fed was "watching this very closely and stands ready to adjust our policy if it appears the inflation undershoot appears consistent". The two-year note fell to 1.347% from 1.363% at yesterday's close, and the 30-year fell to 2.892%.

Oil prices held firm after strong gains on Tuesday on reports showing cuts in USA oil production and declines in US crude and European product stockpiles.

Swedish MPs file lawsuit against Turkey's Erdogan accusing him of genocide
Their detention raised alarm internationally, increasing fears that freedom of expression was being suppressed under Erdogan. According to him, the Turks "do not want the EU" and I believe that the European Union's unfair attitude towards Turkey.

Brent crude futures, the worldwide benchmark for oil, settled up 49 cents at US$48.91 per barrel.

OIL: Benchmark U.S. crude gained 7 cents to $46.15 per barrel in electronic trading on New York Mercantile Exchange. Rental costs rose, with owners' equivalent rent of primary residence increasing 0.3 per cent after advancing 0.2 per cent in May.

Donald Trump seeks talks to overhaul South Korean trade deal
Trade Representative Robert Lighthizer wrote in the letter delivered to the Korean embassy in Washington. The bilateral negotiations sought by the US trade representative must in principle begin within 30 days.

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