FED Will Tighten As Inflation Remains High in the US
The US economy has been surging higher for at least a year now, since summer last year after the coronavirus dive in Q2 of 202o. All sectors have been expanding at a great pace, while inflation was a bit slow to catch up at first. Then it started increasing, but the FED was playing it down as transitionary.
But, after having been above 5% since the beginning of summer, the FED has been forced to accept the reality and the guys have decided to tighten the monetary policy later this year, which is supporting the USD. Below is the CPI (consumer price index) inflation and earnings report.
Highlights of the US September 2021 CPI report
- September CPI +5.4% YoY vs +5.3% expected
- August CPI YoY was +5.3%
- September CPI MoM +0.3% vs +0.3% expected
- August CPI MoM was +0.3%
- Real weekly earnings +0.8% vs +0.3% prior (revised to +0.2%)
Core inflation:
- September core CPI ex. food and energy YoY +4.0% vs +4.0% expected
- August core CPI ex. food and energy was+4.0%
- Core CPI MoM +0.2% vs +0.2% expected
- August core CPI MOM was +0.1% — was lowest since Fed
- Full report
The main numbers are all close to expectations and that’s led to a mostly muted response. The dollar is a bit higher on the higher headline but it’s likely to be the strong wage numbers that get a response. Wage growth is the real crux of inflation and that’s something that was also evident in the non-farm payrolls report.
The caveat is that delta job cuts of food services and low wage workers could be skewing the picture. That something that would quickly resolve with US covid cases plunging. However rising yields suggest the market isn’t so sure. That’s filtering through to USD gains as well.
More details:
- Used cars -0.7% MoM vs -1.5% prior
- Used cars +24.4% YoY vs +31.9% prior
- New vehicles +1.3% MoM vs +1.2% prior
- New vehicles +8.7% YoY vs +7.6% prior
- Shelter +0.4% MoM vs +0.2% prior
- Energy +1.3% MoM vs +2.0% prior
- Energy +24.8% YoY
- Food +0.9% MoM vs +0.4% prior
- Airline fares -6.4% MoM vs -9.1% prior
The jump in food prices was driven by meats, poultry, fish, and eggs. Beef was particularly strong, up 4.8% MoM and 17.6% YoY.
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