2024-02-17 06:26:03
After the US CPI increased higher than expected in January, the January PPI data released on Friday also unexpectedly exceeded market expectations, highlighting that inflationary pressure still exists, and a Federal Reserve official will not be suitable to initiate interest rate cuts until the third quarter of this year. However, former U.S. Treasury Secretary Lawrence Summers warned today that the possibility of the Federal Reserve raising interest rates still exists.
(Previous summary: Fed officials reassured the market: CPI exceeded expectations, no need to overreact, interest rate cuts are not far away)
(Background supplement: US CPI exceeded expectations, and there is no hope of interest rate cuts in March! Bitcoin fell below 49,000 mg and then turned V, and Ethereum fell to 2650)
The U.S. Bureau of Labor Statistics will release key inflation data on Friday (16th).ReportIt showed that the US producer price index (PPI) increased by 0.9% year-on-year in January, which was higher than market expectations of 0.6%. The monthly increase was 0.3%, which was also higher than market expectations of 0.1%, setting the largest increase in five months.
The core PPI, which excludes food and energy, increased by 2% year-on-year and 0.5% month-on-month in January, exceeding economists’ expectations and setting the largest increase since January 2023. PPI in January was led by service costs, which rose 0.6% month-on-month, the largest increase since July last year.
CPI and PPI have exceeded expectations continuously, and the market is betting that interest rates will be cut in June
The January CPI (Consumer Price Index) announced on the 13th increased by 3.1% year-on-year, which was higher than market expectations of 2.9%. The core CPI excluding food and energy costs increased by 3.9% year-on-year, which was also higher than the expected 3.7%. The two inflation data that the Federal Reserve is focused on directly show that inflationary pressure in the United States is still tenacious, and also make the market more pessimistic about the Fed’s expectation to start raising interest rates in the first half of the year.
CME Fed Watch Datashowthe market believes that the chance that the Federal Reserve will suspend interest rate hikes for the fifth time at the March meeting is as high as 90%. The chance that the Federal Reserve will keep interest rates unchanged again at the May meeting has risen to 61.6%. The chance that the Federal Reserve will cut interest rates for the first time by one point at the June meeting is slightly lower. More than half (53.7%).
The market expects the Fed to postpone interest rate cuts until at least June.Source: CME Fed Watch tool
Former U.S. Treasury Secretary: The Fed may still “raise interest rates” next
It is worth noting that two inflation data this week made former U.S. Treasury Secretary Lawrence Summers accept Bloomberg today.interviewShi Yuchu surprisingly stated that inflationary pressure in the United States still exists.The Fed’s next policy move is likely to be to “raise interest rates” rather than cut them.
“The next move is more likely to be a rate hike than a rate cut. The probability is 15%. The Fed must be very cautious.”
Summers noted that economists’ main expectation now is that housing costs will become a significant deflationary factor in overall price indicators, but that has not yet materialized. “Leaving aside the rental component, the cost of owner-occupied housing is not showing signs of deflation and is likely to continue to put pressure on prices through the remainder of 2024.”
In addition, he believes that another key issue that is troubling is the “cost of services”, which does not include food and energy, nor does it include the cost of housing pushed up by rising wages. This indicator did show a significant increase in January.
Summers said this week’s inflation data “certainly calls into question the assumption that inflation will fall to the 2% target in a calm, healthy real economy.” As for when the Fed may start cutting interest rates? He predicted:“At this point, May is unlikely.”
Fed official: Rate cuts may not begin until summer
Other Fed officials also expressed their views on the rate cut that the market has been anticipating after the release of the inflation report that surprised the market this week. Atlanta Fed President Raphael Bostic, who has voting rights this year expresshis outlook is that “interest rate cuts may not start until the summer” and predicts that there will be two interest rate cuts this year, but if the inflation data is optimistic, the number of interest rate cuts may increase to three.
San Francisco Fed President Mary Daly said Fridaycall The Fed should resist the temptation to cut interest rates as soon as possible and wait patiently for the opportunity to cut interest rates; and Richmond Fed President Thomas Barkin said this week’s latest inflation data highlights why policymakers want to see more data before cutting interest rates. .
Extended reading: U.S. bond yields plummeted to 4.13%. “Bottom hunters are making money.” Will the Fed cut interest rates in 2024?
The 10-year U.S. bond yield rebounded, rising above 4.3%
On the other hand, after the release of CPI and PPI data this week, the U.S. bond market expanded its sell-off, and bond yields rebounded. CNBC data shows,10-Year Treasury Bond YieldIt rose above 4.3% again today.Two-Year Treasury Bond YieldIt also rose to nearly 4.65%, reaching its highest level since mid-December last year, when the Federal Reserve signaled that interest rates had peaked.
As yields rise, it means that the market price of bonds has fallen inversely, causing losses to investors who previously bought bonds at the bottom.There are many PTT netizens todayComment: “The debt frog fainted in the toilet crying”, “It seems unlikely that interest rates will be cut in Q1”, but some netizens believe that it is unlikely to raise interest rates in the future, and at most interest rates will stay at a high point for longer.
The 10-year U.S. bond yield rebounded. Source: CNBC
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