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On October 13, U.S. Bureau of Labor Statistics released data showing that the US CPI in September rose 8.2% year-on-year, higher than the market expectations of 8.1%, and the previous value of 8.3%; the September CPI rose 0.4% month-on-month, higher than the market expectations of 0.2% and the previous value of 0.1%. After excluding the volatile food and energy prices, the core CPI in September rose 6.6% year-on-year, higher than the market expectations of 6.5% and 6.3% of the previous value, and the highest since August 1982; the core CPI rose 0.6% month-on-month, higher than the market expectations of 0.4%, and remained the same as the previous value.
US CPI data continues to be high, making the market worried that The Fed's rate hike will not slow down.
The Federal Reserve's rate hike pressure has been huge
Since this year, Fed has raised interest rates for three consecutive times in June, July and September. At present, the Federal Reserve has raised the target range of federal funds interest rates to 3% to 3.25%. After the data released on the 13th, the swap market was fully priced at the Federal Reserve's interest rate hike in November by 75 basis points. U.S. short-term interest rate traders expect the chance of the Federal Reserve raising interest rates by 100 basis points in November to increase significantly, and expect the possibility of the Federal Reserve's policy interest rate reaching the 4.75%-5% range in March 2023.
Minutes of the Federal Reserve's September policy meeting released on Wednesday showed that several officials "stressed that the cost of taking action to reduce inflation may exceed the cost of taking too much action." Policymakers also stressed that it is important to "adjust" the pace of future interest rate hikes to reduce the risk of "significant adverse effects" on the economy.
Some participants pointed out that the intensified tension in labor-management relations, a new round of global energy prices, further disruption of supply chains, and the transmission of higher wages to higher prices exceeding expectations, are all potential shocks. If these shocks become a reality, it could exacerbate the already severe inflation problem. Some participants commented that the wage-price spiral has not yet been formed, but believed that the potential of this situation could be a risk. Participants also expected that the imbalance between supply and demand in the labor market will gradually ease and the unemployment rate may rise, which is an important reflection of the tightening effect of monetary policy.
In addition, participants believe that the labor market needs to weaken to alleviate the pressure on rising wages and prices. Participants expected the transition to weak labor market will be accompanied by an increase in unemployment. Some believe that the transition may be achieved primarily by reducing job openings and slowing down the rate of increase in jobs. Several participants said that given the recruitment challenges, companies may be less willing to reduce staff even as overall economic activity weakens. Several participants emphasized in particular that there is great uncertainty about the future direction of the expected unemployment rate, and the increase in the unemployment rate may greatly exceed staff forecasts. Participants noted that recent data showed moderate growth in economic activity in the second half of this year. Participants lowered their real GDP growth forecast this year, lower than June's expectations.
Compared with the hawkish speeches of many Fed officials, the views of the Fed Vice Chairman Lael Brainard are relatively moderate. In her speech on price stability on October 10, she said that the current slowdown in output exceeded expectations, indicating that the slowdown in demand caused by the tightening of monetary policy is having a partial impact. But labor demand remains strong, and this supply and demand imbalance is mainly reflected in strong wage growth. In the superimposed high rental and housing costs, this means that the core service industry inflation is only expected to ease slowly from current high levels. When implementing the policy, the Federal Reserve considered the rising interest rates, the strengthening of the US dollar, the weakening demand for the United States by foreign economies, and the spillover effect in the opposite direction.
Brenard expects inflation to fall further in the next few quarters. Monetary policy will take restrictive measures for a period of time to ensure a clear and meaningful decline in inflation. The full impact of tightening policies will not be felt in the coming months. Policy interest rates will be further increased, and the actual policy path will depend on the data.
When Fed officials are well-known, Brainard's speech can only be said to be in line with the rules.There is no feeling that the Fed's determination to fight inflation is weakening, nor does it feel that the Fed will not continue to raise interest rates as planned.
International energy price outlook is uncertain
International Energy Agency (IEA) said on Wednesday that the economy continues to deteriorate, coupled with the rise in oil prices caused by OPEC+ production cuts, is slowing global oil demand. With the impact of continued inflationary pressure and interest rate hikes, the rise in oil prices may become the turning point for the global economy , which is already on the verge of recession.
In its latest monthly report, the International Energy Agency (IEA) pointed out that the Organization of Petroleum Exporting Countries and its partners (OPEC+) production cuts could lead to a surge in oil prices. But the IEA also pointed out that the global economy is facing a recession, which limits the rise in oil prices .
The International Energy Agency (IEA) monthly report said that the world is working hard to deal with the worst global energy crisis in history. Starting from November, OPEC+'s actual supply will drop by about 1 million barrels per day. OPEC+ The new round of production cuts has reduced oil supply growth this year and next two years, which will slow down the growth rate of global oil inventories, which may lead to a surge in oil prices. The IEA pointed out that the soaring oil price will lead to a global recession, and global oil demand will drop by 340,000 barrels per day in the fourth quarter. The IEA also significantly lowered its oil demand growth forecast for 2022-23, lowering its global oil demand growth forecast for 2022 to 1.9 million barrels per day.
In addition, European gas prices rose sharply on Thursday as concerns about major Norway's natural gas facilities increased supply risks from Russia. Data shows that the European benchmark natural gas futures price once rose 9.2%. It is reported that personnel from the Nyhamna gas processing plant in Norway are evacuating, while Norwegian police said there is also an "unknown situation" in an additional gas facility, Ormen Lange. The Norwegian Land Guard deployed security personnel on the scene, and the police were on their way to the scene and equipped with resources. Subsequently, the Norwegian police statement said that the "situation" of the Ormen Lange gas facility had been "cleared" and a statement will be issued soon.
Editor: Zhu Yumeng
Proofreading: Zhao Yan
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