The effects of the falling dollar continue to show up in import prices. Non-fuel import prices rose by 0.3 percent in December and have been rising at a 4.8 percent annual rate over the last three months. The higher prices are showing up on most categories of imports from most countries. The price of Imports from the EU have risen at almost a 6.0 percent annual rate over the last three months. The price of imports from China rose at a 2.0 percent rate. Until recently, the price of goods imported from China had been falling.
Higher import prices will force the Fed to decide between its 2.0 percent core inflation target (which we are already above) and attacking unemployment.
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