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Core Consumer Price Index Exceeds Expectations
[font=verdana, arial, helvetica][size=-1] To determine the rate of inflation in the US economy, analysts use the US Consumer Price Index, which was up 0.6 last month following a 0.4 percent increase in February. While it was the sharpest gain since last October, investors on Wall Street had expected the CPI to rise 0.5 percent. The *core* Consumer Price Index rate, which excludes volatile food and energy costs, came in at 0.4 percent against market forecasts for a 0.2 percent rise, serving as the highest monthly increase in the index since August 2002. This data released today was in contrast to producer price data released on Tuesday. Producer price data showed a 0.1 percent rise in the producer price core rate, which was somewhat below market forecasts. Nevertheless, this bit of news suggesting a jump in inflation may increase concern that the Federal Reserve might tighten interest rates, leading to a stronger US dollar. The greenback usually receives support from higher interest rates in the US. Although the euro fell to $1.3004 immediately after the CPI report, while USD/JPY rose at 107.36 yen, the euro later rose to $1.3079 and the greenback dropped below 107 yen. Asian stock markets followed yesterday's gains in US equity markets and that may have led to the short-term rise in yen valuation. Meanwhile, China has still not taken any action on changing its currency regime despite pressure from members of the US government and comments from members of the G7. China may face sanctions if it does not act fast. The US senate is considering legislation to impose considerable tariffs on Chinese imports if China does not adjust its renminbi, or yuan, exchange rate. [/size][/font]