US Inflation down setting up Fed cut

| 16 September 2008 07:31

The inflation rate fell to 5.4% in August in the US, paving the way for a cut in interest rates later today by the Federal Reserve.

With oil prices droping by one-third over the past few months, it was a question as to whether the data would be captured in this report or the next. But, apparently, this report captured the data and this means that the Fed can comfortably cut interest rates this afternoon, knowing that inflation is on its way down. Month-on-month, the CPI Index was down 0.1% but the energy component was down a massive 3.1% and the transportation component 1.5%, offsetting gains in the price of food and clothing.

The market should be pretty happy about this number that in conjunction with Fed easing might be the magic elixir to support jittery financial markets around the globe. We’ll just have to wait and see.


avatar About Edward Harrison

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages, a skill he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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