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Inflation Announcement – Forex Calendar

Inflation announcements report on how quickly or slowly the general price level in the economy is rising. Monitoring inflation is important because inflation erodes buying power. Rising infla­tion is a sign that an economy may be expanding too rapidly. Falling inflation is a sign that an economy may be contracting too sharply.

Inflation data are released in a few different announcements, and it is important that you pay attention to each of them. Here are the three most important inflation announcements that you need to watch:

  1. Consumer price index (CPI): Measurement of the price changes in a basket of goods and services that retail consumers purchase
  2. Personal consumption expenditures (PCE): Another measurement of the price changes in goods and services that retail consumers purchase
  3. Producer price index (PPI): Measurement of the price changes in goods and services that businesses purchase

Impact on Trade Flows

Rising Inflation -> Less Money in Consumers’ Pockets->Decreased Demand for Imports

Falling Inflation -> More Money in Consumers’ Pockets -> Increased Demand for Imports

Impact on Investment Flows

Rising Inflation ->Weakening Currency Loss of Value of Domestic Assets for Foreign Investors -> Decreased Investment Flows

Declining Inflation -> Stabilizing Currency -> No Loss of Value of Domestic Assets for Foreign Investors Stable -> Investment Plows

Impact on Money Supply

Rising Inflation -> Central Bank Raising Interest Rates to Prevent the Economy From Overheating -> Decrease in the Money Supply

Declining Inflation -> Central Bank Lowering Interest Rates to Stimulate the Economy -> Increase in the Money Supply

Impact on Investor Fear

Rising Inflation -> Nervous Investors

Declining Inflation -> Confident Investors

Typical Impact on the Currency

Rising Inflation -> Weaker Currency

Falling Inflation -> Stronger Currency

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