Is it really just Transitory?
FED Chair Janet Yellen and Co may have much to ponder over the coming months as ‘transitory’ deflation is now in its fourth successive month.
After Yellen noted at the recent FOMC meeting that Inflation levels were on target for the long term around 2%, news that June’s level dropped 0.3% will surely come as a concern (1.6% vs 1.7% YoY). Although Yellen admitted herself that it was too ‘premature’ to speculate on the general Inflation trend, it’s clear that market sentiment has shifted to the side of caution, highlighted in the -0.2% headline figure for June Retail Sales. With the correlations of a strong labour market and not ‘very substantial’ upward pressure on wages starting to depict reasoning in downward price shifts, Yellen and Co may shift some hawks to seasoned doves.
Sterling sails past $1.30
Anthony Kurukgy, Senior Sales Trader, quoted in City A.M.