[Asia Economy New York=Special Correspondent Joselgina] Amid the turmoil in crude oil and raw material prices caused by Russia's invasion of Ukraine, U.S. inflation has once again broken the highest level in 40 years, approaching 8%.
As inflation indicators exceeded market expectations, the yield on the U.S. 10-year Treasury note briefly surpassed 2% during the session. The New York stock market is showing a downward trend as no progress in negotiations between Ukraine and Russia has been confirmed amid rising crude oil prices.
On the 10th (local time), the U.S. Department of Labor announced that the Consumer Price Index (CPI) for February surged 7.9% compared to the same month last year. This is the largest increase since January 1982. Not only did it exceed the market forecast of 7.8%, but the increase was also greater than the previous month's (7.5%), which was the largest since February 1982. The February CPI also rose 0.8% compared to the previous month.
The core CPI, which excludes the volatile energy and food sectors, soared 6.4% year-on-year. It rose 0.5% compared to the previous month.
By item, inflation was prominent across the board, including gasoline, groceries, and housing costs. Food and beverages recorded the largest increase since April 2020, the early stage of the COVID-19 pandemic. Gasoline rose 6.6% in just one month. The increase in energy prices, including gasoline, was 3.5%.
Considering that Russia's invasion of Ukraine began at the end of February, it is expected that statistics from March onward will fully reflect the surge in crude oil and other raw materials. Initially, the market expected U.S. inflation to peak in February, but as the Ukraine crisis is unlikely to be resolved quickly, there is a possibility that inflation will worsen. Recently, the nationwide average gasoline price in the U.S. surpassed $4 per gallon for the first time since 2008.
The Wall Street Journal (WSJ) reported, "The outbreak of war has caused prices of crude oil, wheat, and precious metals to soar, potentially prolonging inflation." It added, "Before the Ukraine crisis, inflation was driven by a surge in demand for goods, supply chain disruptions including semiconductors, and logistics chaos, but economic turmoil caused by Russia's invasion and sanctions by countries around the world will now worsen inflation."
Accordingly, the Federal Reserve's monetary policy calculations are expected to become more complicated in the future. The Fed had practically assumed a rate hike at next week's FOMC meeting, but the recent Ukraine crisis and its inflationary impact are expected to affect the pace of tightening going forward. The market is also raising concerns about 'stagflation,' where inflation rises amid low growth, adding further uncertainty to the Fed's actions.
As the February CPI exceeded market expectations, U.S. Treasury yields surged in the New York bond market this morning. The yield on the U.S. 10-year Treasury note briefly exceeded 2% during the session and is currently at around 1.997%.
Major indices in the New York stock market are all declining. As of 10:34 a.m. Eastern Time, the tech-heavy Nasdaq index was trading at around 13,021, down 1.76% from the previous close. The Dow Jones Industrial Average fell 0.90%, and the S&P 500 index dropped 1.15%.
The foreign ministers of Russia and Ukraine held talks in Turkey today but failed to find any significant breakthrough.
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