Soaring U.S. producer prices have increased the pressure on the Fed to accelerate shrinking

Soaring U.S. producer prices have increased the pressure on the Fed to accelerate shrinking


U.S. producer prices rose at the fastest rate on record in November, which put additional pressure on the Federal Reserve to lower the emergency policy settings implemented during the pandemic more quickly to curb soaring inflation.

The Producer Price Index released by the US Bureau of Labor Statistics on Tuesday rose 0.8% in November, a year-on-year increase of 9.6%. This is the fastest year-on-year growth rate since data was first collected in 2010.

“Core” producer prices also set a new record. After excluding items with high volatility such as food and energy, the price rose by 6.9% over the previous year, which was the largest increase since the BLS first started calculation in August 2014.

The report was released at the beginning of a two-day meeting of the U.S. Central Bank. Active debate How to adjust the amount of stimulus it provides to economies currently experiencing economic recession Highest inflation In nearly 40 years.

The Fed is expected to announce on Wednesday that it will reduce its asset purchase plan more quickly, doubling the pace it set a month ago. The goal is to end the bond purchase program a few months in advance so that the Fed can flexibly raise interest rates early.

A few weeks ago, Chairman Jay Powell (Jay Powell) laid the groundwork for this transition, when he expressed support for an early exit because he believed that the risk that inflation could become a longer-lasting problem was increasing.

Once concentrated on the sectors most sensitive to pandemic-related reopening and supply chain disruptions, such as used cars and travel-related expenses, consumer price inflation has shown clear signs of expansion.

The BLS noted that the increase in producer prices last month was also “widespread”, with rising costs related to services, transportation, and warehousing. Scrap steel, gasoline and food prices have also risen.

The Fed is expected to also hint on Wednesday that it will raise interest rates several times next year and make further adjustments in subsequent years. The last time the so-called “dot plot” of personal interest rate forecasts was announced was in September, and Fed officials were divided on whether they would rise from today’s near-zero level in 2022.

Economists now expect the dot plot to show two interest rate hikes in 2022, followed by three to four interest rate hikes in 2023 and 2024.

The moderate Democrats are promote The Fed takes more measures to curb inflation, which is politically harmful to the Biden administration, because the Biden administration is seeking to pass its $175 million “reconstruction better spending” legislation.

Republicans and some members of the president’s party boycotted spending plans that followed another $1.2 trillion bipartisan infrastructure bill, citing rising prices and the painful cost of inflation to Americans.

Like most economists, White House officials expect inflation to slow next year, but there is great uncertainty as to when it will begin.

Economist Alan Detmeister said: “At least for the next six months, these numbers will be very strong, so this means that inflationary rhetoric will continue to heat up until the first quarter. At the end or until the second quarter peaks.” At UBS and former Fed staff. “All of this will be built in the next few months.”

Traders changed their bets on Tuesday after the inflation report was released. According to federal funds futures, they expect to raise interest rates in less than three quarters next year. Before the Omicron coronavirus variant disrupted the market, these transactions were only a little closer to their peak at the end of November because of how fast the market expected the Fed to raise interest rates next year.

Treasury bonds were sold off, pushing up yields on two-year and 10-year Treasury bonds. The sell-off hit the longer maturity the most, with the 10-year Treasury bond yield rising 0.04 percentage points to 1.46%. The yield is inversely proportional to bond prices.

The U.S. central bank may adopt tougher policies and put pressure on the country’s 53 trillion US dollar stock market. The benchmark Standard & Poor’s 500 index fell further from the record closing high set on Friday.

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