US September CPI 8.2%... 7 Consecutive Months Above 8%
CME FedWatch Shows 97.8% Probability of 75bp Increase in November
[Asia Economy Reporter Hwang Yoon-joo] As U.S. inflation is expected to be difficult to control, there is growing speculation that the Federal Open Market Committee (FOMC) will once again implement a 'Giant Step' (raising the benchmark interest rate by 0.75% at once) in the upcoming November meeting.
Jeong Won-il, a researcher at Yuanta Securities, stated on the 15th, "Inflation has exceeded 8% for seven consecutive months since March this year," adding, "Despite the Federal Reserve's strong commitment to curbing inflation reflected in its monetary policy, the inflation rate is not calming down easily."
Earlier, the U.S. Consumer Price Index (CPI) for September rose 8.2% year-on-year and increased 0.4% month-on-month. These figures surpassed the Wall Street Journal (WSJ) experts' expectations of an 8.1% year-on-year increase and a 0.3% month-on-month rise.
The Core CPI, which excludes energy and food prices, rose 6.6% year-on-year and 0.6% month-on-month, also exceeding Wall Street's forecasts of 6.5% and 0.3%, respectively.
Despite the Fed having implemented three consecutive 'Giant Steps,' inflation has not been easily subdued. The Fed reiterated in the minutes of the September FOMC regular meeting that it would maintain a tightening stance until signals of inflation slowing down appear.
The market has already taken a fourth consecutive 'Giant Step' as a foregone conclusion. According to the Chicago Mercantile Exchange (CME) FedWatch, immediately after the CPI release, the probability of a Giant Step surged to 97.8% from the previous day. The possibility of a 100bp (1bp = 0.01%p) hike was newly reflected at 2.2%, contrasting with the previous 0.00% chance. The probability of a 50bp Big Step hike disappeared.
Meanwhile, recession signals are becoming clearer. The International Monetary Fund (IMF) lowered its U.S. growth forecast for this year by an additional 0.7 percentage points from its July projection in the 'World Economic Outlook (WEO)'.
Researcher Jeong diagnosed, "Although the current inflation partly reflects the effect of increased liquidity, considering the significant fiscal impact, the Fed's continued commitment to tightening is expected to accelerate the recession."
In fact, the real hourly wage growth rate, which reflects the cost of living and purchasing power and can predict the robustness of future demand, recorded a 3.0% decline year-on-year as of September.
Jeong added, "The real hourly wage growth rate has been in negative growth for 18 consecutive months since April last year," evaluating that "the contraction of the wealth effect caused by higher interest rates and the weakening demand indicate that a recession is imminent."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
