Federal is trying to find signs of inflation slowly disappearing, but the growth report of the U.S. Consumer Price Index (cpi) released on Thursday gave it a "head blow".
Although the annual growth rate is barely changed at 8.2%, the index's monthly report shows a worrying leap, indicating that potential inflationary pressures are still accelerating. Excluding volatility projects such as food and energy, the core CPI indicators increased by 6.6% compared with the same period last year.
This higher-than-expected growth left the Fed with no choice. can only continue to promote the fourth consecutive 75 basis points hike at the upcoming policy meeting in early November. This could also prompt the Fed to continue to raise interest rates after this point unless there is clearer evidence that price pressure is easing.
Barclays global research director Rajad Hayaksha said: "Most people feel that the United States is about to turn, but this has not happened and will not happen, either in employment or inflation."
He expects the Fed to extend the rate hikes at 75 consecutive bases until the end of this year, and then slow to a 50 basis point rate hike at its first meeting in early February 2023. This means that the federal funds rate will peak between 5% and 5.25%, which is much higher than the 4.6% forecast by most officials in September last year.
As the November midterm election is approaching, the latest inflation data is a blow to Biden , and the rise in prices in the United States has been criticized by many officials.
IMF warned at the annual meeting with World Bank this week that the "darkest moment" is still ahead. Their biggest concern is that the rapid US currency tightening action could cause a shock to the dollar financing, which would further stumble on the fragile emerging and developing economies.
The UK government announced a tax cut plan for debt financing, which forced the Bank of England to intervene multiple times, causing some of the UK pension industry to almost collapse, which also raised concerns that instability could swallow up developed economies.
Faced with these threats, some economists and investors had hoped that the Fed would soften its plan to raise interest rates, as the Fed is now dealing with not only global vulnerability, but also growing concern that efforts to eliminate inflation will lead to massive unemployment. "The hope of any turn is almost shattered. It turns out that solving inflation is harder than they thought." She expects the Fed to raise interest rates twice this year by 75 basis points, and then another 50 basis points hike in February next year.
This is the message passed on in September’s last policy meeting, when the Federal Reserve raised the benchmark policy rate to the target range of 3% to 3.25%. Many officials stress that the cost of doing too little in controlling inflation “may exceed” the cost of doing too much. Federal Reserve Chairman Powell also recently admitted that the possibility of a painful recession in the United States cannot be ruled out.
Even International Monetary Fund also recognized this view, It even called on all countries around the world to take "decisive action" to curb price pressure.
Fed officials seem to have unanimously decided that they will remain aggressive whenever it is necessary to cool down the economy, and they set very high standards for the economic data they need to change direction. They will not formulate policies based solely on future inflation and labor market forecasts, but will wait until real inflation starts to slow down before concessions.
In the eyes of some economists, considering that these indicators are lagging indicators, it will take some time for the impact of monetary policy to penetrate the entire economy, so it is almost certain that the Fed has overdoed. But for the Fed, this is a risk worth taking at this stage. "This is not only about the credibility of the Federal Reserve, but also the impression Powell left to future generations as the chairman of the Federal Reserve."
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-