【Text/Observer Network Zhou Yibo】
On October 13, local time, the US Department of Labor released a report showing that after excluding volatile food and energy prices, the US core consumer price index (CPI) has risen by 0.6% month-on-month for two consecutive months, and the core CPI in September has risen by 6.6% year-on-year, reaching the highest level since 1982.
Among them, housing costs, which account for about one-third of the CPI, have risen by 0.7% month-on-month for two consecutive months and 6.6% year-on-year. Market analysts say the hot U.S. housing market is continuing to push inflation higher in the country.
The release of the report also triggered a shock in the US financial market, the US stock market plunged across the board before the session, and the three major indexes fell by about 2% at one point after the opening, but then staged a "big reversal" that fell first and then rose. According to the analysis of many financial circles, the report will strengthen the determination of the Fed to raise interest rates by another 125 basis points this year, and the federal funds rate will rise to the range of 4.25% to 4.50% at the end of this year.
According to Bloomberg analysis, this is the last CPI report released before the 2022 US midterm elections, which poses a "serious threat" to US President Biden and the Democratic Party's goal of winning the midterm elections. According to Fox News, soaring inflation has made normal life difficult for people across the United States. Some people have bluntly said that the Biden administration should be responsible for this.
On the 13th, Biden tweeted in response that the American people have been squeezed by the cost of living for many years and do not need this report to specifically remind.
Screenshot from the website of the U.S. Department of Labor Bureau of Labor and Statistics
U.S. house prices in September drove the core CPI to a 40-year high
According to the report released by the US Department of Labor on the 13th, the CPI of the United States in September increased by 0.4% month-on-month and 8.2% year-on-year. The month-on-month increase exceeded the market's general expectation of 0.3%, and although the year-on-year increase narrowed by 0.1 percentage points from August, it was still at a historical high.
Specifically, although U.S. gasoline prices fell back in September, down 4.9% month-on-month, there was still an increase of 18.2% compared to the same period last year. Meanwhile, U.S. electricity and gas prices rose 0.4% and 2.9% month-on-month, respectively, in September.
Excluding the energy sector, U.S. food prices rose 0.8% month-on-month and 11.2% year-on-year in September. Medical service prices rose 1.0% month-on-month and 6.5% year-on-year; Transportation prices rose 1.9% month-on-month and 14.6% year-on-year.
It is worth noting that in this report, housing costs, which account for about one-third of the CPI, have risen by 0.7% month-on-month for two consecutive months and 6.6% year-on-year.
Among them, "primary residence rent" and "landlord equivalent rent" (the amount of rent that must be paid to replace a currently owned house with a rental property) both increased by 6.7% year-on-year, reaching an all-time high.
Ian Lingen, head of U.S. interest rate strategy at the Bank of Montreal, pointed out in an interview with First Financial Reporter that the hot housing market in the United States is continuing to drive inflation higher in the country.
"The 30-year mortgage rate soared to its highest level since 2007, but the impact on the property market has only recently begun to be felt, and it is too early to expect the property market to reach an inflection point and reflect it in the inflation report, which investors can observe further in the fourth-quarter economic data." "If the Fed is determined to ease core inflation, it needs to cool the housing market," Lingen said. ”
In summary, after excluding volatile food and energy prices, the core CPI of the United States rose 0.6% month-on-month for two consecutive months and expanded by 0.3 percentage points year-on-year to 6.6%, the largest year-on-year increase since August 1982, higher than the previous value of 6.3%.
In addition, the U.S. Department of Labor report also publishes another key measure of inflation – the Producer Price Index (PPI). From August to September, the US PPI rose 0.4 percent, more than economists estimate a 0.2 percent increase, according to relevant data.
Data on the CPI of each project in the U.S. Department of Labor report
Inflation is high, and the Fed will raise interest rates by another 125 basis points this year
The release of the US Department of Labor caused a shock in financial markets. U.S. Treasury yields spiked, reaching 4 percent at one point, their highest since 2011.
As for the US stocks, there was a big reversal of low opening and high walking: the US stock market plunged across the board before the session, and the three major indexes fell by about 2% at one point after the opening. But as of the close of trading on October 13, the Dow Jones was up 2.83%; The S&P 500 is up 2.6% and the Nasdaq is up 2.23%. The Dow intraday shock exceeded 1500 points, and the S&P 500 index and the Nasdaq ended the daily line for six consecutive losses.
Some analysts pointed out that after the release of the "explosive" inflation data, the main reason why the US stock market has fallen first and then risen may be that the Fed interest rate hike risk boots, which the market has been worried about, have landed.
As of the close of trading on October 13, Eastern Time, the changes in the indices of the US financial market
Since the beginning of this year, the Fed has repeatedly announced interest rate hikes in response to high inflation. On October 12, the Fed released the minutes of the Federal Open Market Committee (FOMC) meeting for September. According to the minutes, the Fed is likely to raise interest rates by 75 basis points and 50 basis points, respectively, at its November and December meetings, raising the federal funds rate to the range of 4.25 percent to 4.50 percent by the end of the year.
Bloomberg pointed out that considering that the US labor market and consumer demand remain resilient, the latest inflation data of the US Department of Labor may strengthen the determination of the Fed to complete the interest rate hike plan.
According to the "Wall Street Journal" news on the 13th, a number of US financial market participants believe that with the introduction of this report, the Fed will raise interest rates by 125 basis points this year or become a foregone conclusion.
Jason Pride, chief investment officer for private wealth at Glenmet Trust, said, "Today's report should encourage the Fed to raise interest rates by 125 basis points by the end of the year in an effort to push interest rates firmly above neutrality for a credible fight against inflation." ”
"The market would like to see inflation cool, but this is not the case, which will allow the Fed to go further down the road to raising interest rates." McCain, chief investment officer at Frost Investment Consulting in the United States, said, "We expect the Fed to continue the most aggressive tightening cycle since the 1980s, bringing interest rates to the range of 4.25% to 4.5% by the end of the year." ”
"While there will certainly be people who want to discuss the possibility of (the Fed) raising interest rates by 100 basis points in November, this report identifies the possibility of a 75 basis point rate hike in November." "The more relevant question is whether (the Fed) will increase the rate hike in December and (next year) February," Lingen said. ”
The market expects the federal funds rate to peak at 4.85% by March 2023. U.S. short-term interest rate traders expect the Fed's policy rate to reach the 4.75%-5% range in March 2023.
While the Fed is committed to fighting high inflation by raising interest rates, Bloomberg analysis said that even if the growth of the US CPI may slow in the coming months, it will still be a slow process to achieve the Fed's goal of "reducing inflation to 2%".
On September 21, after the Fed announced a 75 basis point rate hike, Fed Chairman Powell held a press conference Source: The Paper
Americans complain about the pressures of life, and the pressure of Biden's midterm election has multiplied
The Labor Department report also notes that high inflation has spread across the U.S. economy and is eroding American wages and forcing many to rely on savings and credit cards to survive.
According to the US Fox News reported on the 13th, people from various states in the United States have complained about the burden of high inflation on their lives.
"It's outrageous, it's really getting crazy." Alfred, from Oklahoma City, the capital of Oklahoma, said, "It's too expensive to make a trip to the food market. This number has almost doubled compared to the past few years, especially since I have a large family. ”
Carla, from Bellingham, Washington, said that she had maintained her life quite well, but now she was a bit overwhelmed, "We made a lot of money, but there was no difference in the results." ”
"Everything I like to buy has to cost more money." Tim, from Nashville, the capital of Tennessee, said, "I don't like this situation, like gas, food, vacation [prices]. ”
Tim's wife, Bonnie, added: "I have just retired and I am a bit starting to worry about my pension. ”
Screenshot of Alfred interviewed by Fox News in a video
Elizabeth, another resident from Bellingham, said bluntly that she was already in a situation where she didn't go shopping much, "It's ridiculous to go to the store and can't afford meat and eggs, so I bought two small bags (of food) and paid more than $100."
"I don't think government officials are going to have anything that we ordinary people have to face." Elizabeth said, "Our lives are stretched thin. ”
When asked who is responsible for the soaring cost of living, respondents reportedly gave a different view.
"I think the left is to blame, not Joe Biden himself." Erica of New Jersey said, "Because there's not just one chef in the kitchen. ”
"I would think the president himself is to blame, but that's just my personal opinion." Susannah from Washington State said.
"I don't think the last administration put us in a good position." Ashley, from New Jersey, said, "Honestly, I feel like they all have a responsibility. ”
Screenshot of the US Fox News report
The 2022 U.S. midterm elections will officially open on November 8, when the Democratic Republican parties in the United States will re-compete for control of Congress.
The US Department of Labor released on the 13th is also the last report on CPI data before the midterm elections. Bloomberg noted that the data already poses a "serious threat" to Biden and the Democratic Party's goal of maintaining control of Congress.
On the 13th, Biden indirectly responded to the report of the Labor Department on Twitter, trying to weaken its negative impact on himself.
"Americans have been squeezed by the cost of living: for years, they don't need today's report to know specifically about it." Biden wrote, "That's also a key reason I'm running for president — it's very important that I'm committed to fighting for more breathing space for middle-class families so they can handle the cost of living." ”
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