Figures confuse US inflation outlook
April 28, 2005
The U.S. dollar was slightly up Thursday against both the euro and the yen. The dollar was up to $1.2913 in relation to the euro and stood at ¥105.97 against the yen.
Meanwhile, analysts were debating weather just-released gross domestic product (GDP) data was a harbinger of a rising or falling value for the dollar.
The GDP showed 3.1 percent growth in the first quarter, lower than expected However the core personal consumption expenditures (PCE) deflator, which serves as the Federal Reserve’s preferred measure of inflation, had risen to 2.2 percent, up 1.7 percent from the previous quarter.
According to analysts, the first number could indicate to the Fed that it should let up its tightening of the economy, but the second figure is said to imply that the Fed should continue on its current course of tightening measures.
This means that the Fed could face the difficult choice of either controlling inflation or letting unacceptable unemployment levels persist. One expert warned that the economy was on the road to stagflation, but other experts argue that stagflation could actually have the effect of supporting the dollar.
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