U.S. Consumer Prices Fall Most On Record Sending Dollar Lower

Consumer prices fell 1.0% in October which was the biggest decline on record, dragging the annualized inflation rate to 3.7% from 4.9% - the lowest since last October. Prices fell on the back of oil prices which have fallen 60% since their peak which sent gasoline prices dropping a whopping 14.2%. The declining outlook for the global economy has sunk commodity prices which fell another 2.3%. Costs for personal computers and apparel also fell 0.9% and 1.0% respectively as a weakening labor market and tight lending standards have lead to consumers retrenching.

Abating price pressures will allow the Fed to continue their current easing policy. Expectations are that the central bank will lower their benchmark rate another 50 bps at their next policy meeting. We may get further confirmation of the MPC’s dovish bias today with the release of the minutes from their last meeting. The dollar bearish data and comments from FOMC member Kohn has sent the dollar lower across the board. The policy maker stated that the current market “disruption” may be worst since 1990, and would go on to say that the costs of the housing collapse are “much greater than expected”. The housing sector continued to spiral lower as housing starts and permits fell to a record low pace in October falling to 791,000 and 708,000 respectively.

DailyFX

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