A report released by the US Department of Labor on Thursday showed that the US CPI increased by 3.7% year-on-year in September, slightly higher than expected by 3.6%, compared to the previous value of 3.7%. The core CPI of the United States increased by 4.1% year-on-year in September, in line with expectations, with a previous value of 4.30%. The US CPI increased by 0.4% month on month in September, with an expected 0.30%, compared to the previous value of 0.60%. The core CPI of the United States increased by 0.3% month on month in September, in line with expectations, with a previous value of 0.30%.
Consistent with recent trends, housing costs are still the main factor contributing to the rise in inflation. The housing inflation index, which accounts for about one-third of the CPI weight, rose 0.6% month on month and 7.2% year-on-year. Car prices fluctuated, with new cars rising 0.3% month on month and used cars falling 2.5%. The rise in the gasoline index is also the main reason for the monthly increase in all data, with energy prices rising by 1.5% month on month, including gasoline prices rising by 2.1%, fuel oil prices rising by 8.5%, and food prices rising by 0.2% month on month for the third consecutive month.
The rise in energy inflation has once again raised concerns. For example, the September PPI data in the United States was generally higher than expected, indicating that rising energy costs continue to hinder the path to sustainable low inflation. According to data released by the US Bureau of Labor Statistics on Wednesday, the US PPI rose 2.2% year-on-year in September, higher than market expectations of 1.6% and the previous value of 1.6%; The month on month increase was 0.5%, higher than the market expectation of 0.3% and lower than the previous value of 0.7%. In addition, the core PPI of the United States increased by 2.7% year-on-year in September, higher than the market expectation of 2.3% and the previous value of 2.2%; The month on month increase was 0.3%, higher than the market expectation of 0.2% and the previous value of 0.2%.
In addition to the recent rise in international oil prices caused by the supply and demand gap, the market now faces a significant uncertainty factor as to whether the war between Israel and Hamas will spread and affect the oil supply in the region. At present, the recent surge in oil prices has weakened, but more importantly, production capacity has returned to normal. The demand is quite stable; The capacity of global airlines has finally returned to pre pandemic levels.
Bloomberg economists Anna Wong and Stuart Paul said:" If the risks between inflation and economic growth have become more balanced in the past few months, then the conflict between Israel and Hamas has now shifted the balance back towards inflationary upward risks. Our preset benchmark scenario is that the Federal Reserve will maintain interest rate stability for the rest of this year, but we believe that the risk of further rate hikes cannot be ignored, and the market may have underestimated this
Wong and Paul warn that the increasingly tense situation in the Middle East may have a negative impact on supply, pushing up energy prices. Economists provide examples that if the oil price reaches $100 per barrel, the overall CPI inflation rate may reach 4% again by the end of this year. Wong and Paul wrote, "As long as inflation expectations remain stable, the Federal Reserve may not be concerned about price increases. However, sustained and larger oil supply shocks may increase the risk of inflation expectations spiraling out of control, ultimately prompting the Federal Reserve to continue raising interest rates
After the release of CPI data, the 10-year US Treasury yield increased by 4 basis points to 4.60%. The US dollar index DXY rose 35 points in the short term, reaching 106 points upwards, and rose 0.32% on the day. Spot gold fell by $4 in the short term and is currently trading at $1881.97 per ounce. The gains of the three major stock index futures in the United States narrowed.
The US consumer price index rose rapidly for the second consecutive month in September, highlighting the intention of the Federal Reserve to maintain higher interest rates for a longer period of time. Some analysts believe that recent inflation data highlights how a strong job market can support consumer demand, which may keep price pressures above the Federal Reserve's target. It is currently unclear whether this will make the central bank inclined to raise interest rates again this year, especially considering the recent surge in bond yields, which some officials suggest may replace more tightening policies. But at least it supports policymakers' desire to maintain high borrowing costs for a period of time.
Allianz Chief Advisor El Elian pointed out that the core inflation rate in the United States is consistent with expectations, while the overall indicators are higher than consensus expectations. Especially in September, the core CPI rose by 0.3%, bringing the annual inflation rate to 4.1%. In addition, the weekly number of initial claims for unemployment benefits was relatively low and lower than expected. The direct reaction of the market was an increase in US bond yields. From an analytical perspective, this reminds people to pay attention to the challenges facing the "last mile" of fighting inflation, especially when core service industry inflation remains high and people are concerned that energy price increases will spread to core CPI.
Jay Bryson, Chief Economist of Wells Fargo, also expressed the same view that achieving the last mile of 2% inflation is difficult. He added that this is why the Federal Reserve will continue to tighten for a considerable period of time.
The minutes of the September meeting of the Federal Reserve released on Wednesday also reflect differences within the Federal Open Market Committee (FOMC) responsible for setting interest rates. At the end of the September meeting, the committee chose not to raise interest rates, but the meeting minutes showed lingering concerns about inflation and concerns that upward risks still exist.
Due to the higher than expected CPI increase, traders believe that the possibility of the Federal Reserve raising interest rates again this year and maintaining interest rates unchanged for a longer period next year is increasing. Futures contracts based on the Federal Reserve policy interest rate currently reflect a probability of a rate hike in December of approximately 40%, compared to a probability of approximately 28% before the report is released. If interest rates are raised by another 25 basis points, the Federal Reserve's policy interest rate will reach a range of 5.5% to 5.75%. Traders now expect interest rates to drop by about one percentage point to 4.6% by the end of next year. Prior to the release of the report, futures contracts showed an interest rate level of 4.5% at the end of next year.
Overall, this report may not be sufficient to indicate to the Federal Open Market Committee that it needs to tighten policy again in November, but it will see it as reasonable information that its policies need to 'remain tight for a longer period of time', as the possibility of further rate hikes still exists, "said Stuart Cole, Chief Macroeconomist at Equiti Capital
However, data from another report by the US Department of Labor shows that due to the difference between inflation rate and nominal income growth of 0.2%, the actual average hourly wage in September decreased by 0.2% compared to the previous month; On an annual basis, the salary has increased by 0.5%. According to data from the US Bureau of Labor Statistics, from January 2021 to September this year, only nearly a quarter of the more than 370 tracked occupational categories in the United States experienced wage growth exceeding inflation. As of August this year, the CPI has surged by 16.6% since the beginning of 2021, while the average hourly wage of private sector employees has only increased by 13%. For the recently highly regarded automotive shipping industry, although the average hourly wage of workers in the automotive manufacturing industry has increased by 10% since 2021, the corresponding weekly working hours have also increased.