At 9:30 pm Beijing time on Thursday (10th), the United States will announce the October consumer price index (CPI). As one of the most important inflation indicators before the December meeting, data performance may have an important impact on the future policy path of the Federal Reserve .
Currently, the market generally expects that the price indicators will fall slightly. Last month, the growth rate of US CPI slowed down to 8.0% year-on-year, with a growth rate falling by 0.2 percentage points from the previous year. core CPI increased by 6.5% year-on-year. The sticky characteristics of service inflation have caused its growth rate to fall by only 0.1 percentage point.
Inflation has cooled slowly, the Federal Reserve is paying attention to expected fluctuations
Market analysis believes that on the one hand, the rise of the medical insurance price index has slowed down, the used car market has shown obvious signs of cooling down recently, and the wholesale price index continues to fall. In addition, the increase in food price is expected to shrink, and the above factors are expected to lead to a decline in inflation growth. On the other hand, the impact of OPEC production cuts on refined oil prices will slightly push up inflation.
Before the last interest rate meeting of the year, employment and inflation data exceeding expectations may affect the market's forecast for the path of the Federal Reserve's interest rate hike and the end point of the interest rate hike, and exacerbate concerns about the recession.
It is worth noting that the Federal Reserve's estimates are more cautious than market expectations. According to the Cleveland Fed's inflation-nowcasting tool, the growth rate of CPI will still reach 8.09% in October, the growth rate of core CPI will be 6.59%, while the CPI will increase by 7.99% year-on-year in November.
Last week, the Federal Reserve announced its fourth consecutive rate hike of 75 basis points, while hinting at the possibility of a slowdown in policy intensity in the future. Recent statements from Fed officials also show that a slowdown in rate hikes is forming a consensus, and Powell's proposed move toward the end rate has also been confirmed. For example, Chicago Fed Chairman Charles Evans believes that there is no longer a preemptive position and move forward at a rate of no more than 75 basis points. It makes sense to refer to more data before the goal is achieved.
Although the overall inflation level in the United States hit a high in June, the service price pressure brought about by the continued rise in medical and rent prices caused the core inflation rate to stop falling and rebound in September, which once intensified the outside world's concerns about the Federal Reserve's continued aggressive interest rate hikes.
CME's interest rate observation tool (FedWatch) shows that the probability that the Federal Reserve will continue to raise interest rates by 75 basis points next month is still as high as 43%.
Federal Chief John Williams, New York Fed Chairman, said on Wednesday that the long-term inflation expectations are relatively stable is good news, and the Fed will continue to work hard to restore price pressure to expected levels. Williams explained various methods of measuring inflation forecasts during the meeting organized by the Swiss National Bank, the Federal Reserve and the Bank of International Settlements on the same day, including data including the professional forecaster survey, the U.S. Treasury bond break-even inflation rate, the University of Michigan 's consumer confidence survey and the New York Fed consumer expectations survey. Currently, the five-year inflation expectations of the University of Michigan and the New York Fed have both fallen below 3%.
Williams said: "The long-term inflation expectations in the United States remained and stabilized at a level generally consistent with the long-term goals of Federal Open Market Committee (FOMC). Inflation uncertainty has increased, but it does not seem to be due to long-term expectations." He pointed out that short-term inflation expectations have risen, and the response to the upcoming inflation data is strongest. People's views on future inflation are increasingly divided, which is a question worth further research.
The holiday season is approaching, and consumption faces interest rate impact
Three weeks later, the US holiday shopping season will usher in a climax from "Black Friday".
institutions predict that the upcoming holiday season is difficult to be optimistic, and the highest interest rates in the past 40 years are also bringing resistance to credit card consumption. The potential impact of slowing consumption growth on the economy is undoubtedly a huge challenge for the Federal Reserve, which is trying to ease the pressure on hard landing .
FedEx Chief Financial Officer Mike Lenz said at an investor meeting this week that as the e-commerce bubble faded, the U.S. package volume in the current quarter was already below its expectations.Lentz pointed out that the company is cutting the number of suppliers while taking measures such as reducing flights and grounding aircraft.
According to the forecast of the American Retail Association, 's U.S. holiday sales this year may increase by 6%-8% year-on-year, the same as in 2021, but lower than the growth rate of 13.5% in 2020. However, Matthew Shay, chairman and CEO of the Retail Association, said consumers are feeling the pressure of inflation and rising prices. Many shoppers may meet consumption by mobilizing savings and credit as they have to face higher heating, gasoline and food prices. "In terms of customer behavior, many people are starting to look for more suitable alternatives."
high inflation is shrinking consumers' wallets. government data shows that US consumer purchasing power fell by 3.0% year-on-year, and the US personal savings rate fell to 3.1% in September, the lowest level in nearly 14 years. As American families gradually exhaust government financial subsidies from the epidemic, more and more recession remarks have made them more cautious. More than one-third of consumers surveyed said their financial outlook was worse than the same period last year, Deloitte said. As of the end of September, as much as one-quarter of people were worried about credit card debt.
The Fed's continued interest rate hike may have a further inhibitory effect on consumption. Data shows that the average annual interest rate for Americans holding credit card balances has risen to 18.43% in the third quarter. Total consumer credit increased by $25 billion in September, a significant decrease from $30.2 billion in August.
US credit reporting company TransUnion's latest quarterly credit industry insight report pointed out that many people are turning to credit cards and unsecured personal loans to cope with the impact of high inflation, and the continued rise in borrowing costs has made the United States need to prepare for possible recession. will likely see the continued increase in credit card usage for Americans in the future, and the situation of defaulting on repayments will also increase. "It is not the time for ordinary families to overspent, and the economy is delivering complex messages. It is especially important to weigh the holiday budget and the degree of dependence on credit. People need to consider how much they can repay and how long it will take to repay," said Michele Raneri, vice president of financial services research and consulting at TransUnion. At the end of October, the annual interest rate for newly issued credit cards in the entire market reached 18.73%. With the expectation that the Fed will reach 4.25% by the end of the year, he expects the average interest rate for interest-bearing card accounts to exceed 19% in a few weeks. Repayment pressure may further limit consumer demand, which will affect the expansion momentum of the US economy.
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