NEW YORK- The US dollar inched lower on Friday, after data showed inflation rose modestly in December but was trending lower, which should keep the Federal Reserve on track to cut interest rates by the middle of the year.
Volume faded in the afternoon ahead of the weekend and as investors braced next week for a slew of important US economic data such as non-farm payrolls for January and key events led by the Federal Open Market Committee meeting and the Treasury’s refunding announcement. The latter will outline the US government’s borrowing requirements for the upcoming quarter.
On the week, the greenback was on track to post gains for four straight weeks. The dollar index was last down 0.1 percent at 103.41
Data showed the personal consumption expenditures (PCE) price index increased 0.2 percent last month after an unrevised 0.1 percent drop in November. In the 12 months through December, the PCE price index increased 2.6 percent , matching November’s unrevised gain. Those numbers were in line with consensus expectations.
The annual inflation rate was under 3 percent for the third straight month. The Fed tracks the PCE price measure for its 2 percent inflation target.
“We continue to see pieces of data that suggest at this moment the market shouldn’t be concerned about rising inflation in any significant and immediate capacity,” said Jeff Klingelhofer, co-head of investments at Thornburg Investment Management in Santa Fe, New Mexico.
“That takes further tightening off the table because what the Fed has acknowledged a number of times and continued to point to is that as inflation falls and as their policy rate doesn’t move, then the tightness of monetary policy actually increases,” he added.
