US Fed cuts interest rate to record low. Consumer Prices, Housing Data fall. Dollar declines in Forex Trading. | CountingPips Forex Blog

December 16, 2008 - Forex Economic News

US Fed cuts interest rate to record low. Consumer Prices, Housing Data fall. Dollar declines in Forex Trading.

The U.S. Federal Open Market Committee concluded its monetary policy meeting by cutting its benchmark interest rate by 75 basis points today to a record low interest rate level. The FOMC cut the interest rate from a target of 1.00 percent to a new target range of 0 percent to 0.25 percent and taking the rate under 1.00 percent for first time. Today's rate cut was voted for unanimously by the committee and US Fed cuts interest rate. surpassed market forecasts that were expecting a 50 basis point cut to the 0.50 percent level.

The Fed statement accompanying the rate decision commented on the U.S. economy, "Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further."

The Fed also vowed to "employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability", including buying of mortgage-backed securities, agency debt and maybe even long term Treasury securities. The statement commented that the near zero interest rates would probably be here to stay until the economic picture improved. You can read the full statement here.

Consumer Prices decline most on record in November.

Consumer prices in the U.S. decreased by the most on record in November according to a report released today by the U.S. Department of Labor. The Consumer Price Index fell by 1.9 percent in November after declining by 1.0 percent in October as falling energy prices continued to decrease and contribute significantly to the lower cpi levels. The consumer price decline marked the largest monthly decrease on record for the second month in a row as prices declined the most since 1947. On an annual basis, consumer prices registered a 1.1 percent increase over November 2007 following a 3.7 percent annual increase in October. November's price decline surpassed economic forecasts that were expecting a 1.3 percent monthly decline and a 1.5 percent annual increase.

Core consumer prices, excluding food and energy prices, showed no change in November following a 0.1 decrease in October. The annual change in core prices showed a 2.0 percent increase over November 2007 following October's 2.2 percent annual increase. Market forecasts were predicting core inflation to register a monthly increase of approximately 0.1 percent and an annual increase of 2.1 percent. Contributing heavily to the lower consumer prices was a decrease in the price for energy as the energy index fell by 17.0 percent in November while the gasoline price index also showed a significant 29.5 percent decline. The energy index has fallen for four straight months and decreased by 8.6 percent in October and 1.9 percent in September.

Housing Starts, Building Permits fall, Housing Completions rise.

U.S. housing starts and building permits declined in the month of October according to data released by the Commerce Department on new residential construction. Housing Starts fell by 18.9 percent in November to a seasonally adjusted annual rate of 625,000. November's total is down 5.5 percent compared with November of 2007. The decline in housing starts was below the 736,000 annual rate that market forecasts were expecting for the month.

Building permits statistics, used as a predictor of future construction, showed a seasonally adjusted annual rate of 616,000 permits in November which is a decrease of 15.6 percent compared to October and a 48.1 percent drop from November of 2007. The November level in building permits was below the market forecasts that were expecting permits to number approximately 700,000.

Housing Completions for November increased when compared to October as completions increased to an annual rate of 1,084,000 privately-owned housing completions. This is an increase of 3.3 percent when compared to October's completion totals but still 22.8 percent below the November 2007 level.

Forex - US Dollar falls in trading against all majors today.

The U.S. dollar has been losing ground today in the forex market as the American currency has declined against all of the major currencies. The euro has increased against the dollar as the EUR/USD trades at 1.4047 at the end of the U.S. session at 4:53 pm ET from its 1.3728 opening this morning at 00:00GMT. The pound has advanced against the dollar to trading at 1.5587 from the 1.5320 level at its opening. The dollar has fallen verses the Japanese yen today as the USD/JPY trades at 88.97 after opening the day at 90.50 yen per dollar.

The dollar has declined verse the Swiss franc as the USD/CHF has fallen from its 1.1556 opening to trading at 1.1228 while against the Canadian dollar the USD has fallen to trading at 1.2043 from 1.2311. The Australian dollar and New Zealand dollar have both increased against the dollar and have advanced to the exchange rates of 0.6940 and 0.5781, respectively.

USD/CHF Chart - The Euro gaining vs. the US Dollar today and reaching above the 1.4000 in currency trading action(4-Hour Chart).

Today's Forex Chart

tags: interest rates, us fed, usd, forex trading, consumer prices

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