Journal Article

Recent Appreciation in the U.S. Dollar Unlikely to Have Large Effect on Domestic Inflation

Abstract: The U.S. dollar has appreciated more than 8.5 percent since May 2021, raising questions about potential effects on domestic inflation. If imports are billed in foreign currencies, then a strong dollar could reduce import prices and therefore domestic inflation. However, U.S. imports are almost entirely invoiced in U.S. dollars, dampening this effect. We find that the recent appreciation in the U.S. dollar has a negligible effect on domestic inflation as measured by the core price index for personal consumption expenditures.

Keywords: Inflation; US dollar;

JEL Classification: E31; E4;

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Bulletin

Publication Date: 2022-08-17

Issue: August 17, 2022

Pages: 4