Answer:
In the mid-2010s, the global economy witnessed the U.S. dollar gain steam against other major currencies and saw oil prices freefall, along with several other macroeconomic events. 1 Conventional wisdom suggests the health of the U.S. dollar has an inverse relationship to the price of imports and in this case, a strong U.S. dollar decreases the price of imports. However, import prices of consumer discretionary goods don't always move in sync with changes in the U.S. dollar, as foreign firms often choose to maintain its prices in the U.S. market.
Instead, the connection between import prices and the U.S. dollar is reflected by the tendency for commodity prices to fall when the dollar strengthens. The commodity markets are quoted in U.S. dollars so it may seem intuitive that when the dollar rises, commodity prices will decrease. Simply, a stronger U.S. dollar will impact inflation through commodity prices rather than consumer goods. So, a key factor to consider in anticipating how the currency will affect inflation is the behavior of commodity prices.
Explanation:
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