The inflation data in the United States has been full of ups and downs over the past three years, but one thing seems to be traceable in history - that is, compared to the changes in data from 1966 to 1982, the overall trend of the inflation rate in the United States is almost identical.
Alejandra Grindal, Chief Economist of Ned Davis Research Inc., headquartered in Florida, and London Stockton, a research analyst, said that the year-on-year change chart of CPI shows that overall inflation in the United States is "very similar" to the inflation trajectory of more than 40 years ago.
As shown in the above figure, the absolute values of year-on-year changes in US CPI during these two periods still seem different - the peak inflation rate in the 1970s and 1980s was much higher than 10%, while in the current cycle, the US inflation rate reached its peak of 9.1% in June last year. However, during these two periods, after the initial decline in US inflation rates, they were immediately followed by unsettling developments in the Middle East region.
In the 1970s, Arab countries imposed oil embargoes on the United States and other Western countries, leading to a second and more severe inflation in the late 1970s and early 1980s. And this time, Iran's foreign minister is also calling on Islamic countries to boycott Israel, including stopping oil transportation to the country.
Grindal and Stockton stated in a report last Friday that although they do not expect inflation to hit the peak of 2022 again, "this does not mean that inflation will move towards a clear downward path, as both short-term and long-term risks coexist.
The most significant short-term inflation risk is undoubtedly the potential for the conflict between Israel and Hamas to spiral out of control and engulf the entire Middle East region.
Rania Gule, a market analyst at global diversified asset broker XS.com, also stated that if the United States is embroiled in war, the escalation of events in the Middle East is expected to affect natural gas and gasoline prices, and may trigger price increases in the short term. BCA Research, headquartered in Montreal, is weighing some extreme scenarios in 2024, including the possibility of oil prices soaring above $130 per barrel - or even as high as $160 per barrel, but this is not the company's basic assumption.
Earlier this month, data released by the US Department of Labor showed that overall CPI inflation in the United States continued to rise by 3.7% year-on-year in September, still far above the Federal Reserve's inflation target of 2%.
At present, the inflation rate in the United States has been stuck in the "Age 3" for four consecutive months, making it difficult to continue, proving that high prices are still more stubborn than many people expected.
Due to the potential spread of geopolitical tensions in the Middle East, oil prices have been rising for two consecutive weeks. The three major US stock indices closed sharply lower last week. The 10-year US Treasury bond yield, known as the "anchor of global asset pricing," has recently risen above the 5% mark, reflecting strong market expectations that the Fed's tightening cycle may become "higher and longer".