US Inflation Rises to Highest Since 2014

In another sign of broad-based improvements in the United States, the latest headline inflation figures released by the US Bureau of Labor Statistics showed consumer prices rising by 1.70% on an annualized basis in November.  Besides marking the fastest pace of price growth since October of 2014, it gives the Federal Reserve some more breathing room to raise interest rates as proposed during the latest FOMC statement.  The predominant driver of the latest gains was the resurgence in energy prices while food prices continue to fall.  Energy costs rose by 1.10% year over year while the cost of food decreased by -0.40% over the same period, declining for three straight months.  The US dollar continued its ascent versus major peers, with the EURUSD pair falling below 1.0400 to its lowest point since 2003 before managing to retake the level and rebound modestly overnight.

As expected, the Swiss National Bank opted to leave monetary policy unchanged, with interest rates held at a record low -0.75%.  Although SNB President Thomas Jordan was optimistic when speaking about the move by the Federal Reserve to raise interest rates, political developments remain concerning.  During remarks on Thursday, Jordan highlighted the benefit of monetary policy moving towards gradual normalization.  However, the SNB highlighted that they are willing to accommodate policy even further while continuing to intervene in the foreign exchange market to spur inflation and offset Franc strength.  Jordan reiterated this point by not ruling out the possibility of reducing interest rates from current levels as the weakness in the Euro puts new external pressure on the alpine nation’s economy.  After falling the last three sessions amid weakness in the Euro, EURCHF is trending modestly higher on the session.