Federal 's efforts to fight inflation seem to have little effect. The latest data shows that the core inflation indicator in the United States hit a new high in more than 40 years in September.
According to data released by the U.S. Department of Labor on the 13th local time, the U.S. consumer price index (CPI) in September rose 0.4% month-on-month after seasonal adjustment, 0.3% higher than the expected value; the CPI in September rose 8.2% year-on-year, with an expected value of 8.1%, and the previous value was 8.3%.
After excluding the volatile food and energy prices, the US core CPI rose 0.6% month-on-month in September, 0.4% higher than the expected value, and the same as the previous value; the core CPI rose 6.6% year-on-year in September, the largest year-on-year increase since August 1982, and 6.3% higher than the previous value.
Montreal Bank Ian Lyngen, head of US interest rate strategy, told First Financial reporter that the effect of the Federal Reserve's monetary policy lags, and the previous consecutive rate hikes in are far from truly reflected in economic data. "Nevertheless, in the face of the rapidly deteriorating economic outlook, the market will still respond to some 'evidence' that inflation is slowing down or continues to remain high. For example, today's CPI report is likely to trigger differences of opinions. How much will the Federal Reserve raise interest rates at its November meeting. At this stage, we are more skeptical about whether the monthly data will shake the position of Fed officials. After all, policy makers have always emphasized that before the austerity policy is stopped, a series of evidence is needed to show that inflation is cooling down."
US stock opened sharply lower. As of the time of publication of the First Financial reporter, the Dow Jones Industrial Average fell by nearly 500 points, the S&P 500 index fell by 2.2%, and the Nasdaq led the decline in major stock indexes, falling more than 3.0%, approaching the 10,000-point integer mark. US Treasury yield rose, 10-year US Treasury yield rose above 4%, and two-year US Treasury yield rose to 4.44%.
Rate hike effect lags?
According to the CME Group's interest rate observation tool (FedWatch Tool), after the CPI data was released, the probability of the Federal Reserve raising interest rates by 75 basis points for the fourth consecutive month rose to 91.4%, and there is even an 8.6% chance of raising interest rates by 100 basis points.
Matt Weller, global research director of Jiasheng Group, told China Business News: "The Federal Reserve is obviously satisfied with the job market. The remaining price stability in the dual mission has become the only parameter to promote monetary decisions by the most important financial institutions in the world." He believes that the possibility of continued rise in core inflation has concerns the Federal Reserve and may strengthen the Fed's expectation of another 75 basis points rate hike next month. In addition, the September non-farm employment report released last week showed that the labor market remained solid, and traders have begun preparing for the continued hike of 75 basis points in December.
Standard Chartered North American macro strategy head Steve Englander told the First Financial reporter that the Federal Reserve has successfully convinced the market that interest rates will remain high for a longer period of time, and this position is unlikely to change. "Since July, Fed officials have tried to convey to the market that interest rates must maintain a high level for a longer period of time to fight inflation. In the medium term, interest rates will continue to rise, and expectations that austerity policies will put pressure on the economy are also heating up."
Food and housing continue to push up inflation
sub-item, the United States still contributed a large amount in September increase , offsetting the decline in gasoline prices. The food index rose 0.8% month-on-month and a year-on-year increase of 11.2%; the housing index, which accounts for one-third of the CPI weight, rose 0.7% month-on-month and a year-on-year increase of 6.6%; the transportation service index rose 1.9% month-on-month and a year-on-year increase of 14.6%.
Lingen believes that the hot US housing market continues to drive inflation higher. "The 30-year mortgage rate soared to its highest level since 2007, but the impact on the real estate market has only recently begun to show. It is too early to expect the real estate market to usher in a turning point and be reflected in the inflation report. Investors can observe further in the fourth quarter economic data. If the Fed is determined to ease core inflation, it needs to cool down the real estate market," he said.
How to move US stocks?
JP Morgan Chase published a report on the 10th, saying that if the year-on-year increase of US CPI in September is higher than the previous value of 8.3%, US stocks may fall 5% in one day. If the indicator reading is between 8.1% and 8.3%, the S&P 500 may fall 2%. If the annualized CPI rate in September is lower than 8.1%, the stock market is expected to rebound sharply.
The bank pointed out that the high September inflation report, poor third-quarter financial report and oil price turmoil may cause the S&P 500 to fall to 3,300 points, which means there is still room for decline from the current price to 5.7%; on the contrary, the easing inflation level and better-than-expected corporate financial reports can allow the S&P 500 to try again to 4,000 points, which means there is still 14.3% room for upward from the current level.
Barclays strategist Anshul Gupta and others compared the performance of the S&P 500 with the top ten economic indicators such as monthly employment data and quarterly GDP . After finding that in the past decade, the stock market's reaction to these economic indicators has never been as negative as it is to CPI now.
