The US CPI continued to hit a nearly 40-year high in January, the FED accelerated water closing expectations were bullish, and gold plunged more than $8

At 21:30 Beijing time on Thursday (February 10), the United States released January inflation data, another nearly 40-year high, and the probability of the Fed accelerating the tightening of monetary policy increased significantly. As of press time, spot gold plunged more than $8 to $1821.79 an ounce; the U.S. index jumped more than 35 points to 95.91.

Specific data show that the U.S. January CPI recorded a 7.50% annualized rate, a new high since February 1982, the expected and previous values were 7.20% and 7% respectively; the U.S. core CPI rose to the 6% mark in January, hitting a new high since September 1982, with the expected and previous values being 5.90% and 5.50%, respectively.

After the release of the US January CPI data, the trend of US interest rate futures hinted that the market was betting on the possibility of a 50 basis point rate hike by the Fed at the March meeting to 43% from less than 30% previously, raising interest rates nearly six times during the year.

Expectations of Fed officials

That level is reminiscent of the inflation shocks of the 1970s and 1980s, when inflation prompted the Fed to accelerate its plans to raise borrowing costs and reduce its holdings of government bonds and mortgage-backed securities. But Fed officials remain hopeful that inflation is about to peak.

Atlanta Fed President Raphael Bostic said in an interview with CNBC on Wednesday: "I hope that as we move from spring into summer this will translate into a slow decline, which will give me some comfort that we are moving in the right direction and may allow the Fed to raise rates at a slower pace as the economy continues to recover." ”

Cleveland Fed President Loretta Mester said the Fed would have to pull back on easing faster than in the past and tame inflation well above target, but perhaps it would not be necessary to start with a 50 basis point hike in March.

Meister noted that with some supply constraints resolved and the Fed withdrawing some of the support it provided to the economy during the pandemic, inflation is expected to ease somewhat this year – falling back above 2% later this year.

Mestre was a member of this year's FOMC vote. She said the Fed considers raising interest rates at every meeting, and after the March 15-16 meeting, future rate hikes will depend on the intensity of inflation, as well as the extent to which inflation slows or how long it lasts.

The Fed has agreed to start raising interest rates at the March 15-16 policy meeting. But it's unclear how much the Fed will have to do to deal with inflation, or how likely the commodity supply chain and the U.S. labor market are to return to normal pre-pandemic low inflation and low unemployment on their own.

Unemployment fell to 3%?

Some analysts believe the Fed is already out of touch with economic trends. The current unemployment rate of 4% is low by historical standards, and is likely to get even lower with record job openings, rising wages, and the likely boom in the economy during the year as the current pandemic subsides. Some predict that the unemployment rate will fall to or below 3 percent this year, the lowest since the 1950s.

Ethan Harris, bank of America's global economic chief, described the U.S. economy as showing no signs of deceleration this week, and he expects the Fed to raise rates seven times this year, meaning it will raise rates at every remaining policy meeting in 2022. He said the Fed is not yet willing to admit that it is too late to act on the fight against inflation, "I think they should." ”

But the pandemic-era U.S. economy has been more than once a surprise, and there are several pulling forces at work. For example, lower federal government spending may slow consumption, but a healthy household finance may support consumption.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said he expects rising inventories, slowing global shipping and the Fed's initial interest rate hike to quickly pull inflation down, returning to the Fed's 2 percent target next year, with prices for key commodities such as cars even falling later in 2022.

He added that interest rates will still need to rise at that time, but the reason is that the economy continues to improve, not because the Fed is still fighting inflation, "once they think they have a chart of inflation trends, the Fed will proceed cautiously." This should come in the middle of this year. He expects car prices to fall sharply and house price appreciation to slow.

Supply chain tensions are easing

In financial markets, interest rates charged to households and businesses have risen since the Fed began slowing down bond purchases and signaling rate hikes late last year. The cost of financing homes is rising. There are also some signs of improvement in the supply chain. Inventories in many commodity sectors have been replenished, alleviating the surge in commodity prices in the early stages of the pandemic.

Shipping giant A.P. Moller-Maersk executives said after releasing their latest earnings report on Wednesday that they expect the global shipping situation to "normalize" in the second half of 2022. Throughout the pandemic, backlogs of goods and container shortages at ports have plagued businesses as global manufacturers have found it harder to reopen the global economy than to shut it down in response to the pandemic.

Gene Seroka, executive director of the Port of Los Angeles (POLA), told local media that the supply chain problems that once paralyzed major U.S. ports were alleviated as the number of ships queuing up outside Southern California ports fell to its lowest level since last fall.

Mark Zandi, chief economist at Moody's Analytics, tweeted: "As the outbreak continues to subside... Inflation will also fall. Global supply chains are becoming smooth... And as workers return to health, wage growth will slow. ”

This article originated from Huitong Network