At present, the market generally expects that the price index will drop slightly. Last month, the year-on-year growth rate of CPI in the United States slowed down to 8.0%, a drop of 0.2 percentage points from the previous growth rate. The core CPI growth rate was 6.5% year-on-year, and the sticky characteristics of service inflation caused its growth rate to drop only 0.1 percentage points.
Inflation cools down slowly, the Federal Reserve pays attention to expected fluctuations
Market analysis believes that, on the one hand, the rise of the medical insurance price index has slowed down, the used car market has shown signs of cooling recently, the wholesale price index continues to fall, and the food price increase is expected to shrink, These factors are expected to lead to a decline in inflation growth. On the other hand, the impact of OPEC production cuts on refined oil prices will push up inflation slightly.
Before the last interest rate meeting of the year, unexpected employment and inflation data may affect the market's predictions on the Fed's rate hike path and end point interest rate , and exacerbate concerns about economic recession.
It is worth noting that the Fed's forecast is more cautious than market expectations. The inflation-nowcasting tool of the Cleveland Fed shows that the growth rate of CPI in October will still reach 8.09%, the growth rate of core CPI will be 6.59%, and the CPI will increase by 7.99% year-on-year in November.
Last week, the Federal Reserve announced the fourth consecutive interest rate hike 75 basis points at the same time, hinting at the possibility of slowing down the policy. The recent statements of Fed officials also show that a consensus is being formed on slowing rate hikes, and Powell’s proposal to raise the terminal interest rate has also been confirmed. For example, Chicago Fed President Charles Evans (Charles Evans) believes that it is no longer necessary to take a pre-emptive stance and move forward at a rate of no more than 75 basis points, and it makes sense to refer to more data before the goal is reached.
Although the overall inflation level in the United States reached a high level in June, the pressure on service prices brought about by the continuous rise in prices of medical care and housing rents caused the core inflation rate to stop falling and rebound in September, which once aggravated the outside world’s concerns about the Fed’s continued aggressive interest rate hikes worry.
CME Group (CME) interest rate observation tool (FedWatch) shows that the probability of the Fed continuing to raise interest rates by 75 basis points next month is still as high as 43%.
The Fed's top three, New York Fed President John Williams (John Williams) said on Wednesday that long-term inflation expectations are relatively stable is good news, and the Fed will continue to work hard to restore price pressures to expected levels. When Williams attended a conference organized by the Swiss National Bank, the Federal Reserve and the Bank of International Settlements in Zurich that day, he explained various methods of measuring inflation forecasts, including surveys of professional forecasters, U.S. Treasury bonds break-even inflation rate, Data from the University of Michigan Survey of Consumer Sentiment and the New York Fed Survey of Consumer Expectations. Both the University of Michigan and the New York Fed's 5-year inflation forecasts are now back below 3%.
Williams said: "Longer-term inflation expectations in the U.S. have remained and stabilized at levels broadly in line with the Federal Open Market Committee (FOMC) long-term objective. Inflation uncertainty has increased, but this does not appear to be due to longer-term expectations ’ ,” he said, noting that short-term inflation expectations have risen, responding most strongly to upcoming inflation data. Views on future inflation are increasingly divided, and this is an issue that deserves further study.
The holiday season is coming, consumption is facing interest rate shocks
Three weeks later, the US holiday shopping season will usher in a climax starting from "Black Friday". The
agency predicts that the upcoming holiday season is hardly optimistic. The highest interest rate in the past 40 years is also bringing resistance to credit card consumption. The potential impact of the slowdown in consumption growth on the economy is for the Federal Reserve, which is trying to ease the pressure of hard landing Undoubtedly a huge challenge.
FedEx Chief Financial Officer Mike Lenz said at an investor conference this week thatPackage volumes in the U.S. have fallen short of expectations for the current quarter as the e-commerce bubble fades. Luntz pointed out that the company is reducing the number of suppliers, while taking measures such as cutting flights and grounding planes.
According to the forecast of the National Retail Industry Association, this year's US holiday sales may grow by 6%-8% year-on-year, which is the same as in 2021, but lower than the growth rate of 13.5% in 2020. However, Retailers Association president and chief executive Matthew Shay said consumers were feeling the pressure of inflationand rising prices. Many shoppers are either mobilizing savings and credit to meet spending as they face higher heating, petrol and food prices. "In terms of customer behaviour, a lot of people are looking for more suitable substitutes."
High inflation is shrinking consumers' wallets. Government data showed that U.S. consumer purchasing power fell 3.0% year-on-year, and the U.S. personal savings rate fell to 3.1% in September, the lowest level in nearly 14 years. As American households gradually deplete government financial subsidies for the epidemic, the growing recession rhetoric has made them more cautious. Deloitte said more than a third of consumers surveyed said their financial outlook was worse than this time last year. As of the end of September, nearly a quarter were worried about credit card debt.
Fed continued to raise interest rates may have a further dampening effect on consumption. The average annual interest rate for Americans holding credit card balances rose to 18.43% in the third quarter, the data show. Total consumer credit increased by $25.0 billion in September, down from $30.2 billion in August.
The latest quarterly credit industry insight report released by the US credit reporting company TransUnion pointed out that many people are turning to credit cards and unsecured personal loans to deal with the impact of high inflation, and the rising cost of borrowing makes the US need to prepare for a possible recession . is likely to see continued growth in credit card usage among Americans, as well as an increase in delinquent payments. "This is not the time for the average household to boldly overspend, the economy is sending mixed messages," said Michele Raneri, vice president of financial services research and consulting at TransUnion. "It's especially important to carefully weigh holiday budgets and reliance on credit. People need to consider them. How much can be repaid and how long will it take to repay.” Ted Rossman, senior industry analyst at
Bankrate, said that at the end of October, the annual interest rate on new credit cards in the market reached 18.73%. With the Fed expected to hit 4.25% by the end of the year, he expects the average rate on interest-bearing card accounts to exceed 19% within weeks. Repayment pressure may further limit consumer demand, which in turn affects US economic expansion momentum.
