Situation

 

On a monthly basis

  • Prices rose by 0.91% (0.54% in Feb’07)
  • Core inflation ( inflation excluding volatile items) growth dropped to by 0.39% (0.53% in Feb’07) 

On an annual basis

  • Prices rose by  2.78% p.a ( 2.42% p.a in Feb’07)
  • Core inflation ( inflation excluding volatile items) growth dropped to 2.5% p.a (2.7% p.a in Feb’07) 

 

Background

  • Core CPI has dropped. (click on image for a larger visual )
  • Producer prices are at its highest levels in the past 6 months ( 3.21% p.a)Crude prices which were averaging 59.38$  in Feb’07 had risen to a 60.73 $ average in Mar’07 ( 2.26% rise)
  • As on April 16 ‘07 crude is averaging at 63.58$. ( 4.7% more than Mar’07) 

 

 

Conclusion ( click on image for a larger visual)

  1. CPI looks likely to retain the 3 % p.a - 1.3% p.a range till mid ‘07. ( drops due post Apr’07)
  2. The minutes of the last monetary policy meeting offers an interesting direction - as to the future monetary policy of the Fed.
  3. Read the note

 

 

Note

Point 1

Have a look at the manner in which the UK Producer prices behaved upto Mar’07 ( see  : UK Producer prices Mar’07) and compare the visual to the Producer price behaviour in the US.

Its the same

However in this scenario - the media states that UK may consider a interest rate hike - while at the same time US would consider an interest rate drop.

Just looking at the image - the picture for Producer prices - states that the US and UK are in the same situation.

 

Point II

Have a look at the manner in which the Euro Consumer behaved upto Mar’07 ( see  : Euro Consumer Mar’07) and compare the visual to the Consumer price behaviour in the US.

Its the same

However in this scenario - the ECB states that they may consider a interest rate hike - while at the same time the media states that US would consider an interest rate drop.

Just looking at the image - the picture for Consumer prices - states that the US and Europe are in the same situation.

 

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