Strong dollar is also crashing the brakes on inflation and this is delaying the Federal Reserve decision to increase the interest rate for the first time in nine years.
Since last summer there is 50 percent fall in the price of the petroleum and this has pushed Fed’s PCE inflation index to 0.3 percent increase over the past year.
U.S. inflation is stabilizing with the oil prices slowly stabilizing but the increasing dollar price has become the hurdle for inflation where the foreign goods such as French wine, Asian made high-definition television and German autos are becoming less expensive for Americans to buy.
In March, the prices U.S. paid for imported goods and services fell for the eighth time in the last nine months but the costs of the oil actually rose for the second time.
Import prices last month dropped 0.3 percent or 0.4 percent excluding fuel.
Import prices have fallen by 10.5 percent over the past 12 months. Cheap oil is the main reason even the price of imports excluding fuel have declined by nearly 2 percent in the same period.
Imported goods are available at low cost which is not good as customers pay less for all goods such as cell phones, household-appliances thereby stretching their paychecks further.
The stronger dollar will make Americans goods more expensive for foreigners reducing the demand for American goods. It is affecting the corporate profits and could cost Americans their job and thereby slowing the growth of the nation.
The inflation rate which Fed officials are considering healthy for economy won’t close in on the banks 2 percent target until 2016.
If the dollar remains strong then inflation is unlikely to rise much in near future.
It was reported that if the inflation continues then it will be difficult for Federal Reserve to increase the interest rate.