Strengthening U.S. Dollar May Help Curtail Inflation – Consumer Inflation Dynamics

The U.S. dollar has risen over 7% since the beginning of the year driven by increasing interest rates and a flight to safety for international investors.

A stronger dollar can also be a hindrance for certain U.S. companies that have a large portion of their sales overseas. Should the dollar continue on its rising trend, economists and analysts believe that the run up in the dollar will translate into lower earnings for a number of U.S. companies. Foreign investors tend to flock to the U.S. dollar as rates increase, seeking higher returns on idle cash, and during periods of geopolitical turmoil.

A challenge that emerges for U.S. multinationals when the dollar rises is that the price of U.S. exports become more expensive worldwide. As the dollar increases in value versus other currencies, U.S. exported goods become less affordable in the international markets. Conversely, the strengthening dollar has also made imported goods into the United States more affordable, which become less expensive for American consumers as the dollar rises.

Sources: https://fred.stlouisfed.org/, Bloomberg, Commerce Department

Print Version: Consumer Inflation Dynamics May 2022

PlanRock offers financial planning tools, investment portfolios, various levels of advice, and full-service support. Please contact 800-677-6025 or go to www.PlanRock.com for more information about how we can help you reach your goals.

© PlanRock Investments, LLC. The content above is available for use only by authorized subscribers, clients and where permissible as such. This content is not authorized for resale. Past performance does not guarantee future results. The sources we use are believed to be reliable, but their accuracy is not guaranteed.