The speech of Janet Yellen for today could probably the first ever to show that confidence of the regulator and her leadership has weak inflationary pressures, by which she considered as a temporary factor that has been shaken.
In her comments, the Chair of the Fed Reserve said: "We expect inflation to rise (to the target level) in the next one or two years, but I must say that I'm not sure about it." (DJ Newswires)
Earlier, she pointed out that this phenomenon is temporary and will run out, but a long period of time has passed. While Yellen repeatedly stated that it will happen soon. And the outset of her career with the Fed has finally come showing lack of confidence, which is expected to continue in the coming years.
"My colleagues and I are not sure that (the factors that restrain inflation) are temporary, and we are very closely watching inflation," she said during her speech at the New York University Business School. (DJ Newswires)
In addition, she also added that "there may be longer-lasting factors that need to be addressed." (DJ Newswires)
In general, her statement can indicate that the bank began to show doubts on the problem of low consumer inflation in the States, as it gets deeper than it was previously thought. J. Yellen repeatedly pointed out that the drop in unemployment to the 2000 levels, as well as the rise in gasoline prices and some other goods, do not support an increase in inflationary pressure to the target level of 2.0%.
In our opinion, the problem is really very broad. Decades of "life in debt" was cultivated in the United States since the 80s of the last century and was the basis for a noticeable increase in the American's standard of living and also became the reason regarding the crisis of 2008-09, for which up to now is necessary to pay. A significant number of Americans still have debts, which do not allow them to happily continue "life in debt". Low wage growth rate and employment growth, mainly in areas with relatively small salaries, were unable to reverse the situation and even provide significant support for inflation.
When this process stops, it might be difficult to say but could possibly take place with great certainty that the consequences of the "life in debt" policy for a long time will have an impact on the U.S economy and to the Americans.
Forecast of the day:
The EUR/USD currency pair is trading with minor changes. It is likely that before the actual long weekend in the United States, which will start tomorrow, there are no any noticeable movements. It seems that the price will remain in the narrow range of 1.1710-1.1775. Only some foreign events can revive the pair.
The AUD/USD pair remains below the level of 0.7575. In case that it stayed below this mark, we should expect the continuation of the local decline to 0.7530.
* The presented market analysis is informative and does not constitute a guide to the transaction.
