The rapid rise in US consumer prices showed no signs of abating in September, leading to a swing trading session on Wall Street, as investors pondered whether the Federal Reserve would have to become more aggressive to slow rampant inflation.
A measure of core CPI inflation, which strips out volatile energy and food costs, rose 6.6 percent year-on-year last month, faster than the 6.3 percent rate in August — and its fastest pace in four decades.
The increase in the overall CPI last month, including energy and food, was up 8.2 percent from a year earlier, unchanged from the 8.3 percent annual increase. registered in August.
Compared to the previous month, the general CPI rose 0.4 percent while the core measure rose 0.6 percent.
The S&P 500 fell 2.4 percent shortly after Wall Street opened Thursday; Before the markets opened, the futures market had indicated a 1.3 percent gain. With that said, stocks posted a dramatic turnaround and closed 2.6 percent higher. The Nasdaq Composite Index closed up 2.2 percent, recovering from a decline of about 3.2 percent.
The yield on the two-year Treasury, which is sensitive to changes in monetary policy expectations, rose 0.24 percentage point to 4.53 percent, its highest level since mid-2007, before easing back to 0.18 percentage point on the day.
Jimmy DamonThe CEO of JPMorgan Chase said that while he could not predict whether tighter monetary policy would plunge the US economy into a deep recession, the failure of markets to sell more sharply was an indication that investors still believed a “moderate recession” was possible.
“My view is, in a tough recession, you would expect the market to drop by another 20 or 30 percent,” Dimon said Thursday at the Institute of International Finance’s annual membership meeting.
Dimon noted that consumer spending is still much higher than it was before the COVID-19 pandemic, adding that consumers “maybe they can do that for another nine months before inflation and spending catch up. That’s why I think you’re going to see a strong economy for a while.” .
Investors and economists have been looking for signs that the Fed may begin to slow the rate hike from the 0.75 percentage point it announced in each of its past three meetings. But Thursday’s CPI data suggests that no such move is in immediate sight.
After the report, futures market traders priced in a 98 percent chance that the Fed will raise interest rates by 0.75 percentage points in November, compared to 84 percent on Wednesday.
Kathy Bostancik, chief US financial economist at Oxford Economics, said consumer inflation remained “stubbornly high” due to “continuous broad-based rise” in prices for essential services. “High inflation readings will keep the Fed firmly tightening and on track for at least another 125 basis points this year,” she wrote in a note.
The futures market now expects the fed funds rate to reach 4.94 percent by May 2023, up from 4.65 percent the day before. The central bank’s policy rate is in a target range of 3 percent to 3.25 percent.
One of the more worrisome features of the CPI report was that housing costs — described as “shelter” in the data — rose 0.7 percent in September, compared to the previous month, and were up 6.6 percent year-on-year. .
insistence orgasm inflation It has been a major political challenge for the White House and congressional Democrats, overshadowing the rapid recovery from the pandemic while creating millions of jobs since Joe Biden took office.
In a statement Thursday, Biden acknowledged that Americans are “under pressure from the cost of living” and said there was “more work” to be done to fight inflation despite some “progress.” If Republicans take control of Congress in the November midterm elections, he said, “the day-to-day costs will go up, not down.”
Republicans raised prices central part of their message to voters, blaming the Biden administration and linking the rise to the Democratic-led stimulus enacted by the president in March 2021 that pumped $1.9 trillion into the US economy.
On Wednesday, several lawmakers and Republican candidates jumped on new numbers showing that the Producer Price Index, a measure of companies’ wholesale prices, rose faster than expected in September.
Rick Scott, the Republican senator from Florida who chairs the Republican Senate National Committee, said inflation was an “unbearable blow to families trying to get back on their feet” in his home state in the wake of Hurricane Ian.
American consumers took some relief from the drop in gasoline prices that occurred over the summer: Biden-era inflation peaked so far in June, when the consumer price index rose 9.1 percent year on year. But the administration and Fed officials would have liked to see the rate increases fade away more quickly than they have been.
Additional reporting by Joshua Franklin in New York