Forex Analysis & Reviews: High inflationary pressure forces the Fed to continue raising rates

Euro and pound decline on news that two key inflation indicators showed sustained pressure in the US in recent months, supporting the case for a new interest rate hike by the Federal Reserve System next week.

The Personal Consumption Expenditures (PCE) price index, excluding food and energy, the Fed's preferred core inflation measure, rose 0.3% in March compared to the previous month and 4.6% compared to a year earlier. The Commerce Department report also said that the employment cost index, which the Fed also closely monitors, rose 1.2% in the first quarter compared to the previous period, exceeding economists' forecasts.

I would like to remind you that the main goal of the Fed is a 2% level, which is measured by a broader indicator, but the regulator considers the core indicator as a better indicator of the trend.

Price data, especially in combination with rising labor costs, confirm expectations that Fed policymakers will continue to raise interest rates, raising them by another quarter of a percentage point at next week's meeting.

A positive aspect in the PCE report was the slowdown in the growth of service costs. Thus, service prices, excluding housing, rose only 0.2% in March. However, in annual terms, the indicator remains elevated at 4.5%.

Analysis are provided by InstaForex

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