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Moderate inflation remains despite improved US import prices

Thu Aug 15, 2019
watermark Economic news

The US price imports grew unexpectedly in July even if the main trend remains weak amid subdued inflation pressure on imports. 

According to the Labor Department on Wednesday, inflation will likely continue to become moderate even if consumer prices rose in July. This allows the Fed to further reduce the interest rates to limit the economic damage from the US-Sino trade war. 

On Tuesday, President Donald Trump postponed the additional 10% tariff on thousands of Chinese, including technology products, clothing, and shoes, imports on December 15 from September 1. 

However, adjusting the date would not necessarily ease economic problems, especially with just recent inversion of the US Treasury yield curve, which has been a dependable indicator of recession. 

Last month, the Federal Reserve reduced borrowing rates by 25 basis points for the first time since 2008n amid trade tensions and slow global growth. Financial markets have already placed in another quarter percentage rate cut on the next Fed meeting on September 17 and 18. 

Import prices rose by 0.2% in the previous month after the cost of petroleum products bounced off that counters the drop in prices for capital goods and motor vehicles. Meanwhile, import prices fell by 1.1% in June. 

Forecast for import prices would remain the same in July, based on a survey of economists. After a year in July, imports decreased by 1.8% from 2.0% drop in June. 

For now, a lower borrowing costs push the refinancing activity, after reaching a three-year high last week. The housing market has been one of the weakest in the economy as the residential housing dropped for six quarters which has been going on for the longest time since the Great Recession. 

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