text/"Tsinghua Financial Review" senior editor Sun Shixuan
On September 13, the US Department of Labor announced that the US Consumer Price Index (CPI) rose by 8.3% year-on-year in August 2022. This is the US monthly CPI 's year-on-year increase of more than 8% for six consecutive months, which makes market participants expect Fed to raise interest rates significantly on September 21.
The US CPI data for August released on September 13 was higher than expected, indicating that the high inflation in the United States may not have peaked, causing market participants to expect the Federal Reserve to raise interest rates sharply on September 21 (next Wednesday).
The U.S. Department of Labor announced that the U.S. Consumer Price Index (CPI) rose 8.3% year-on-year in August 2022, which is the year-on-year increase of US monthly CPI is higher than 8% for six consecutive months, indicating that US inflation remains high. At the same time, the core CPI after excluding food and energy prices, which have large price fluctuations, rose 6.3% year-on-year in August, an increase of higher than market expectations.
8 US CPI rose 0.1% month-on-month, higher than market expectations of a decline of 0.1%.
Figure 1 The year-on-year increase of the US CPI
Source: tradedeconomics.com
Figure 2 The year-on-year increase of the US CPI and the year-on-year increase of the core CPI
Source: US Department of Labor
Figure 3 The year-on-year increase of the US CPI since 1980
Source: www.macroview.club
Deducting the volatile food and energy prices, the US core CPI rose by 0.6% month-on-month in August, followed by a month-on-month increase of 0.3% in July.
In July 2022, the US CPI rose 8.5% year-on-year; in June, the US CPI rose 9.1% year-on-year, the largest increase since November 1981.
In August 2022, the United States food prices rose by 0.8% month-on-month, and the food prices consumed at home rose by 0.7% month-on-month. In August, U.S. food prices rose 11.4% year-on-year, the largest year-on-year increase since May 1979.
Housing rent is an important part of the US CPI. Housing rent includes the main residence rent and the owner's equivalent rent (Owners’ Equivalent Rent, referred to as OER). The main residence rent is the real home rent paid by the tenant. The owner's equivalent rent can be considered virtual rent, measuring the rent that the house holder needs to pay if he rents a similar house. The U.S. owners’ equivalent rental index rose 0.7% month-on-month and 6.3% year-on-year, the largest year-on-year increase since April 1986.
analysts pointed out that housing rents are sticky and account for a large share of CPI. The sharp rise in housing rent prices means that US inflation will continue to remain high to a certain extent.
The high year-on-year growth rate of the US CPI is expected to force the Federal Reserve to raise interest rates aggressively at its next meeting from September 20 to 21. Previously, the market had widely expected that the Federal Reserve would raise the federal funds rate by 75 basis points by then, and now, raising interest rates by 75 basis points is not enough. Some institutions predict that the Federal Reserve will raise interest rates by 100 basis points by then.
As an international central currency, the Federal Reserve's significant policy interest rate adjustment will have a significant impact on the global monetary and financial system, and the US financial market is the first to be affected.
The three major U.S. stock indexes closed down sharply on Tuesday, setting the largest single-day percentage drop since June 2020. Among them, the Dow Jones Index fell 3.94%, the S&P 500 Index fell 4.32%, and the Nasdaq Index fell 5.16%. Driven by expectations that the Federal Reserve will raise interest rates sharply, the dollar rebounded sharply against major currencies, with the dollar index rising 1.5% to 109.85 points, the largest single-day percentage increase since March 2020. The 2-year U.S. Treasury yield rose to a nearly 15-year high of 3.794%.
On September 13th local time, US President Biden claimed at an event held to commemorate the signing and taking effect of the Inflation Rduction Act one month after it entered into force that the Inflation Rduction Act is the most important legislation passed by the US Congress to fight inflation and is also one of the most important laws in US history.
On August 16, local time, Biden signed the Inflation Reduction Act with a total of US$750 billion, which officially came into effect.
However, the Inflation Reduction Act actually mainly involves issues such as energy security and climate change, health care, and tax reform.The bill is not true and has little direct correlation with inflation cuts. Its positive impact on the U.S. anti-inflation and achieving economic growth is expected to be limited.
When talking about the latest inflation situation in the United States, Biden said that overall, prices in the United States have been basically flat in the past two months, which is good news for American families, but it will take more time and determination to lower inflation in the United States.
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