Inflation rises 6.4% in January, exceeding expectations
Expected end of rate hike delayed further
Opinion that the 2% inflation target is too low
US inflation is falling more slowly than expected, raising concerns about long-term fixation of high inflation. It is also predicted that the US Federal Reserve will raise interest rates by June.
The U.S. Consumer Price Index (CPI) increase rate announced by the U.S. Department of Labor on the 14th (local time) was 6.4% year-on-year, higher than the market expectation (6.2%), and the month-on-month increase rate was 0.5%, the first three months since October last year. highest during
Accordingly, the market is predicting that the Fed will raise interest rates three times in a row by 0.25 percentage points in March, May and June. According to the FedWatch of the Chicago Mercantile Exchange, which shows the forecast of the benchmark interest rate through futures trading on the morning of the 15th, the probability of the Fed raising interest rates in June rose to 52.2%, exceeding the possibility of freezing or lowering them. Concerns have grown that the interest rate could rise by more than 5.25 to 5.50 percent in June from the current US base rate of 4.5 to 4.75 percent. This is higher than the Fed’s projected rate range of 5.0% to 5.25% at the end of this year. At the Federal Open Market Committee (FOMC) meeting on the 1st of this month, the market considered March as the end of the hike, and put weight on May after the announcement of the US’employment explosion’ indicator on the 3rd. Following this, due to concerns about prolonged high US inflation, the observation of the end date was pushed back until June.
On this day, Patrick Harker, president of the Federal Reserve Bank of Philadelphia (Federation), said in a lecture at a university that the benchmark interest rate should be raised above 5%, saying, “Inflation is not going down fast.” New York Federal Reserve President John Williams also emphasized that “inflation is still too high” in a speech at the New York Banking Association.
Treasury yields jumped on the same day on the possibility of prolonged tightening by the Fed. The 6-month US Treasury yield exceeded 5% for the first time in 16 years since July 2007, and the 2-year Treasury yield, which is sensitive to the Fed rate, exceeded 4.6%. The Korean market also fluctuated. In the Seoul foreign exchange market, the won-dollar exchange rate closed at 1282.2 won, up 12.8 won. The KOSPI also closed at 2,427.90, down 37.74 points (1.53%) from the previous trading day.
Some point out that the Fed’s 2% inflation target itself is wrong. “There is a high possibility that the US inflation rate will be stuck at the 3-4% level,” said Muhammad El-Erian, chief economic adviser at Allianz. It would make it difficult for the Fed, which promised 2%,” and Harvard University professor Kenneth Rogoff also said in an interview with Bloomberg TV, “The Fed should have set the target at 3%. If the target was set high, the risk of a recession would have been low.”
New York =
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.