November 28, 2022

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Wall Street dips in pre-trade after inflation figures - E24

Wall Street dips in pre-trade after inflation figures – E24

Price inflation in the US eased to 8.2 percent in September, but it was higher than expected. Certainly not something the Fed would like to see, says the chief economist.

Food in the United States has become more expensive in the past year. Here from the Dollar Store in California in August.
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The latest CPI figures showed that inflation in the United States reached 8.2 percent in September US Department of Labor.

Early on, economists expected prices to increase 8.1 percent in September, according to Bloomberg figures.

Thus, the price increase was higher than expected.

Certainly not something the Fed wants to see. This reinforces expectations of a new triple hike at the upcoming rate meeting, wrote Marius Gunsholt Hof, chief economist at Handelsbanken, in an SMS to E24.

Core inflation, which does not include food and energy prices, closed at 6.6 percent – the forecast was 6.5 percent.

Rising prices for shelter, food and medical treatment were among the biggest drivers behind the price hikes during the month.

Petrol, used cars and clothing prices fell.

Market React

The pre-trading on Wall Street shows that the market is reacting strongly to the latest inflation numbers.

The Nasdaq fell 3 percent and the yield on two-year government bonds jumped by 10 basis points.

That’s probably about as bad news as you can get today, says Hof.

The inflation numbers are bad news for the Fed, says Marius Gunsholt Hof of Handelsbanken.

The market reacts the most, of course, to the strong growth in core inflation. Should strong monthly growth continue, annual growth will in fact continue to rise from today’s already high levels.

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– Add this along with the strong jobs numbers for September, which showed a further decline on the supply side of the labor market, and it is clear that the Fed is under significant pressure now, says Hof.

It also surprised the price increase in August

Price inflation in the US has been high over the past year, and the US central bank has worked hard to reduce price pressure.

In August, price inflation eased rather than reversed. The CPI closed at 8.3 percent in August, down from 8.5 percent in July.

Core inflation came in at 6.3 percent in August, also higher than expected.

Apply more than expected for unemployment benefits

At the same time, figures from the US Department of Labor show that the number of first-time applicants for unemployment benefits in the United States (unemployment claims) was 228,000 people last week.

Up front, the number of first-time applicants was expected to be 225,000 people, according to consensus forecasts from Trading Economics.

The Fed expects more rate hikes

The minutes of the US central bank’s previous interest rate meeting were released on Wednesday.

It showed that Fed members still expect that further rate hikes will be necessary.

Members’ assessment was that there was a need to move toward, and then maintain, a more restrictive interest rate policy in order to achieve the goals of “maximum employment and price stability”.

The US central bank holds eight interest rate meetings annually. Two weeks after the interest rate meeting, the minutes of the discussions made by the members at the meeting are published.

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The Federal Reserve raised the interest rate further by 0.75 percentage points at the previous meeting, so it is now in the 3.0 – 3.25 per cent range – the highest level since 2008.

The central bank also announced that interest rates will be raised further.