Econo-Girl's loyal readers may remember her prediction that China would never end its peg to the dollar. Ahem. It seems that China would end its peg to only the dollar. Now it will be pegged to 'a basket of currencies.' (Love that word 'peg')
What will be interesting is how this is approached. How will that formula be calculated? Essentially China is hedging its bets and loosening its ties to the U.S. economy. Has China lost faith in the dollar? Econo-Girl will keep her gimlet eye on the calculation.
Will China now undervalue its currency compared to everyone else too, and not just the dollar? Essentially, will the amount a yuan gets in dollars remain the same or go higher, even though the dollar is only a part of how the Chinese now value their currency?
What practical consumers can expect is that our prices will go up here in the States, which Econo-Girl happy that she bought that glass- stained front door recently, before the price went up. I'll let you know when Leisure Lad buys that one.
Supply shocks - like rising prices for clothes and other things made in China. That's what inflation is made of.