Inflation Has Given The Fed A Breathing Space To Focus On Boosting The Labour Market.

In July, the PCE price index rose by only 1.6%. After eliminating volatile foods and energy, the so-called core PCE price index rose by 1.5% over the same period last year. PCE is the Fed's favorite price index.

Most of the signs suggest that inflation pressures have eased. The Fed set a long-term target of 2% annual inflation as a sign of price stability and healthy economic growth. Inflation has been below target for 27 consecutive months.

Chris Rupkey, chief financial economist at UFJ bank in Tokyo, MITSUBISHI, said inflation may be under pressure, but it is hard to see pressure in this report. The Fed has enough breathing space.

The two largest Federal Reserve Policy objectives Is to achieve price stability and full Obtain employment 。 Low inflation gives the Fed greater flexibility to focus on employment.

Since last year, the unemployment rate has dropped sharply, from 7.3% a year ago to 6.2% in July, but it is still higher than the historical level. Some Fed officials worry that the Fed's loose monetary policy will have unexpected side-effects, high inflation or asset price bubbles.

　　 Federal Reserve It has gradually reduced its bond purchases and plans to end its debt purchase in October.

Fed officials have said they will raise short-term interest rates next year if growth is expected by the Fed. But Federal Reserve Chairman Yellen said that if the economic growth is better than expected, the Fed may act earlier. If inflation accelerates, the Fed thinks the economy is overheating and may raise interest rates earlier. Data released yesterday did not show inflation accelerating.

Prices have risen steadily since the beginning of this year, and the Fed expects inflation to reach targets by the end of 2015. As early as February this year, the index showed a 1% year-on-year price increase.