U.S. Outlook: Low inflation gets the Fed’s attention
What really got the Fed to hold off on raising interest rates in September was the recent behavior and near-term outlook for U.S. inflation.
For more on this and other developments this week, see my full report. Highlights are outlined below, followed by a link to the full U.S. Outlook report, delivered on Sept. 18.Key observations:
- Producer prices are the weakest we have seen since 2009. Producer price declines often lead to weaker consumer inflation down the road.
- It’s not just energy prices that are driving the declines. Even producer food prices are dropping.
- We have cut our own inflation forecasts as a result of these recent trends.
- Until the Fed sees signs that energy and commodity prices are stabilizing, it could remain in a holding pattern.