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Rate hike worries down on inflation data

Wednesday, October 22, 2014 - 01:42

Inflation remains well under control according to the latest consumer price index, giving the Federal Reserve more room to keep interest rates low for awhile. Bobbi Rebell reports.

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What rate hike worries? The latest inflation data confirms - it's still not a problem- so what's the rush? Decision Economics Cary Leahey: SOUNDBITE: CARY LEAHEY, SENIOR ADVISOR, DECISION ECONOMICS (ENGLISH) SAYING: "The logic of the inflation data would suggest to the Fed that they have more time to prepare for the eventual liftoff. If you add that to the fact that you have had all this market dislocation, you can make an argument that the Fed may go slower. rather than faster which the market has already assumed." New data shows inflation at the consumer level up just one tenth of a percent in September. Food costs went up, but energy costs continue to go down, leaving the core rate, which excludes those volatile components, up one tenth of a percent. REPORTER BRIDGE: BOBBI REBELL, REUTERS CORRESPONDENT (ENGLISH) SAYING: Over the last 12 months- CPI was up 1.7 percent. SOUNDBITE: CARY LEAHEY, SENIOR ADVISOR, DECISION ECONOMICS (ENGLISH) SAYING: "What is going on is the economy is not really growing much faster than potential, and maybe even growing less than potential, and that would tend to put downward pressure on the price level. So you are just not seeing inflation because there just isn't enough growth in the U.S. to give you much." Financial markets now expect the first interest rate hike in the fourth quarter of 2015 instead of the second quarter. REPORTER BRIDGE: BOBBI REBELL, REUTERS CORRESPONDENT (ENGLISH) SAYING: But all this focus on the lack of inflation for commodities - may be overlooking another area that could creep up: Atul Lele, Chief Investment Officer at Deltec International : SOUNDBITEl: ATUL LELE, CHIEF INVESTMENT OFFICER, DELTEC INTERNATIONAL (ENGLISH) SAYING: "At the moment there is not too much to worry about in terms of commodity price increases. When you are seeing the U.S. dollar rise that is simply adding a dampener effect to commodity prices globally so we are not seeing cost push inflation coming from commodities what we are seeing now is in wage inflation and that is far more difficult for central bankers to curb than commodity price inflation." The Fed's next meeting is October 28 and 29th.

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Rate hike worries down on inflation data

Wednesday, October 22, 2014 - 01:42