The U.S. consumer price index (CPI) growth rate in September was 3.7% compared to the previous year, slightly exceeding market expectations. The global financial market once again fluctuated due to concerns that high interest rates may be prolonged as the ‘3% inflation rate’, which exceeds the U.S. Federal Reserve’s (Fed) inflation rate target (2%), remains fixed. The domestic stock market, which had been showing recovery for two consecutive days since the 11th, also turned into a downward trend on the 13th.
On the 12th (local time), the U.S. Department of Labor announced that the CPI in September was 3.7% compared to the previous year and 0.4% compared to the previous month. This is a slowdown compared to August (3.7%, 0.6%), but exceeds market expectations (3.6%, 0.3%). The core CPI increase rate, excluding highly volatile foodstuffs and energy, was 4.1%, which was in line with market expectations and appeared to have slowed compared to August (4.3%). The core CPI increase rate compared to the previous month was 0.3%, the same as the August figure.
Wall Street’s evaluation of this CPI is mixed. A decline in the core CPI growth rate is a positive sign, but ‘inflation prices stuck at 3%’ suggests the Fed’s prolonged high interest rates. The number of new weekly unemployment claims in the U.S. announced on this day was 209,000, falling below 210,000 for four consecutive weeks, showing that the U.S. labor market is still exerting pressure on inflation.
Accordingly, the New York stock market showed an upward trend immediately after the CPI announcement, but as the analysis that ‘if the economy is not forcibly slowed down, inflation will remain in the 3% range’ spread, government bond yields began to soar. The 10-year government bond interest rate was 4.70%, up 0.13 percentage points from the previous day, and the three major New York stock indexes fell for the first time in five trading days, including the Nasdaq index falling 0.63%.
On the 13th, KOSPI also finished trading at 2,456.15, down 23.67 points (0.95%) from the previous day. Individuals began to defend the index by net purchasing KRW 422.5 billion, but there were limits to their ability to withstand the selloff led by foreigners and institutions. Foreign investors continued selling for 15 consecutive trading days since the 18th of last month. KOSDAQ also closed at 822.94, down 12.55 points (1.50%). On this day, the won-dollar exchange rate also closed at 1350.0 won, up 11.5 won from the previous day due to the strong dollar.
There are still many expectations in the market that the Federal Reserve will freeze interest rates in November. However, there remains a sense of caution that there may be an additional increase at the last Federal Open Market Committee (FOMC) meeting in December of this year. According to the Chicago Mercantile Exchange’s FedWatch, interest rate futures investors see the possibility of a December hike at about 33%.
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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.