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13 Mar 2013
Forex Flash: US inflation rate of 2% likely in the cards – NAB
With FOMC members also expecting - consistent with their longer-term objective - inflation of around 2.0% this equates to a real (i.e. after inflation) interest rate of around 2-2.25% which is around our view; albeit slightly higher. Is a 2% inflation rate going forward reasonable?
According to the NAB Research Team, “There are certainly tail risks of higher inflation given that the Fed is in unchartered waters regarding how to exit from its QE strategy. Upside risks are also implied by the Fed’s aim of holding interest rates low for longer than would normally be the case as the economic recovery strengthens. However, at this stage, the Fed is being backed to hold the line on inflation.”
According to the NAB Research Team, “There are certainly tail risks of higher inflation given that the Fed is in unchartered waters regarding how to exit from its QE strategy. Upside risks are also implied by the Fed’s aim of holding interest rates low for longer than would normally be the case as the economic recovery strengthens. However, at this stage, the Fed is being backed to hold the line on inflation.”