U.S. Dollar Falls After BLS Data Release

EconEye Admin

2 months ago

The U.S. dollar fell after BLS data released on April 10 showed a rise in total CPI inflation—driven by higher oil prices—but stable core inflation, signaling that the Federal Reserve is unlikely to raise interest rates.—wsj.com

Answer the following questions to check your understanding of the story.

Why does the BLS data suggest that the Federal Reserve is unlikely to raise interest rates?

The Fed is unlikely to raise interest rate because the ___________.

a) the prices of gasoline, fuel oil, electricity services, and piped gas services are falling

b) oil prices are rising

c) the total CPI inflation rate is rising

d) the core CPI inflation is stable

Wrong! - Total CPI is volatile and not the Fed’s main guide. Oil, Gasoline, fuel oil, electricity, and piped gas are energy components that are volatile and do not guide the Fed’s interest rate decisions.

Well Done! - Core inflation excludes temporary price shocks and measures underlying inflation. If it is stable, the Fed doesn’t raise interest rates.

Why did the U.S. dollar fall on the release of BLS inflation data?

The U.S. dollar fell because supply of U.S. dollars __________ and the demand for U.S. dollars __________.

a) decreased; also decreased

b) increased; decreased

c) increased; also increased

d) decreased; increased

Wrong! - If U.S. assets are not expected to pay higher interest, demand for them and for U.S. dollars decreases, and their supply and the supply of U.S. dollars increase.

Good Job! - If interest rates on U.S. assets are not expected to increase, investors sell them (increasing supply of U.S. dollars) or avoid buying them (decreasing demand for U.S. dollars).

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