Derek Halpenny, European Head of GMR at MUFG, suggests that while the CPI data is not the officially targeted measure of inflation for the Fed, it is still a very important piece of data and data that we feel underlines the more favourable domestic demand conditions in the US relative to what is happening abroad. Key Quotes “Service CPI, excluding energy has moved higher for seven consecutive months and at 2.9% is at its highest level since October 2008. We will look to see what is happening at the underlying level but with wages now beginning to accelerate more notably in the US, we see these inflation pressures continuing to build. In that context, we had comments from San Fran Fed President Williams last night and he very much stressed not to place too much importance on the current volatility in financial markets. As he put it; “daily dives aren’t accurate reflections of the state of the vast, intricate, multi-layered US economy. And they shouldn’t be viewed as the four horsemen of the apocalypse”! He added the main focus of the FOMC was on the jobs market and inflation. So perhaps we should remember that FOMC members will probably be placing as much importance on today’s CPI data than the ups and downs of global equity markets.” For more information, read our latest forex news.