Burning outlook: Inflation index CPI (USA) 12:30 PM London time

CPI inflation index forecast + 1.9% (annually)

Inflation index CPI previously + 1.7%

The range of forecasts: +1.8 to + 2.1%

Why is it important?

Inflation is one of the two most important indicators of the state of the economy for the decision making by the US Central Bank (Fed) on monetary policy. (The second indicator is employment).

For the US Federal Reserve, the normal range of inflation is from + 2% to + 2.5% per annum.

As we can see, inflation in the US is below the lower normal level for the Fed (for many years, since the crisis of 2008-2009.)

However, perhaps a rise of inflation above the level of 2% will be seen.

The Fed, sequentially, is very slow in taking steps, but turns to tightening monetary policy - new Fed rate increases (the plan is in December) - and the beginning of withdrawing excess liquidity from the markets.

Thus, inflation is an important indicator of monetary policy - and its movement affect the dynamics of bond yields, the stock market - on capital flows between countries - and at exchange rates, respectively.

If inflation hits above 1.8%, the dollar will strengthen, the euro and pound down, the dollar-franc and the dollar-yen up. Gold will down, and the US stock market down.

If inflation is 1.7% or less - the euro and a pound will rise a little higher.

The material has been provided by InstaForex Company - www.instaforex.com