I was doing my usual research and I stumbled upon a few things which made me wonder how the USA is still surviving strongly in the global markets even when internally they are facing inflation and economic pressure. My understanding is that when inflation remains high, the Fed usually keeps interest rates higher for longer in order to slow down inflation and this also indirectly keeps the dollar strong because higher Treasury yields attract foreign investors into US assets.
- The CPI came at 3.8%, beating economists’ forecasts, which indicates that inflation is still persistent and not fully under control. This increases the chances of the Fed maintaining higher interest rates for a longer period.
- Oil inventories came at -4.306M, lower than the forecast of -2.000M, indicating tighter oil supply or stronger demand. This can push oil prices higher and contribute to inflation through increased transportation and energy costs.
- Export prices came at 3.3% versus the forecast of 1.1% and previous 1.5%, showing that the prices of US goods sold internationally have increased, which can indicate ongoing inflationary pressure in production and commodities.
- Import prices came at 1.1% versus the forecast of 1.0% and previous 0.9%, indicating that imported goods are becoming more expensive, which can further contribute to inflation within the economy.
Overall, these indicators suggest that inflationary pressures are still present in the US economy. However, despite internal economic stress, the dollar can remain strong globally because markets focus on higher Fed rates, stronger Treasury yields, and continued foreign investment into US assets.
Posted by Inevitable-Acadia127