- US consumer prices post largest year on year rise since 1990
- Energy, shelter and vehicle costs led the gains
CPI inflation hit a three-decade high of 6.2% in October, above analysts’ expectations of 5.8%, as supply shortages and strong consumer demand continued to push up prices. Upward pressure was broad-based, with energy costs recording the biggest gain (30% vs 24.8% in September), namely gasoline (49.6%). Inflation also increased for shelter (3.5% vs 3.2%); food (5.3% vs 4.6%, the highest since January of 2009), namely food at home (5.4% vs 4.5%); new vehicles (9.8% vs 8.7%); used cars and trucks (26.4% percent vs 24.4%); transportation services (4.5% vs 4.4%); apparel (4.3% vs 3.4%); and medical care services (1.7% vs 0.9%). The CPI for all items less food and energy jumped 4.6% from a year earlier last month, quickening from a 4% rise in September and above market estimates of a 4.3% jump. Today's reading showed the largest annual increase in core consumer prices since August 1991.
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile app"Transitional" inflation in the US has already risen to 6.2%. The last time such a rapid growth rate was recorded was in the 1990s. Source: Macrobond, XTB
Energy costs, food prices remain major drivers of inflation. Source: Macrobond, XTB
Also inflation is seen in slower-moving categories like higher rents. This is likely a source of particular concern for Fed policymakers, because it increases the risk that price pressures could last longer than initially expected. Source: Macrobond, XTB
Today's reading is bad news for President Biden and the central bank. It will be difficult for Fed chairman Powell to maintain the rhetoric that the current price pressure is temporary and related to the problems associated with the Covid pandemic and that conditions will return to normal within the next year.
A separate report showed that initial claims for jobless benefits fell to 267k, a fresh pandemic-era low after declining 4k from the previous week. That was below analysts' estimates of 269k.
Investors believe that inflation pickup and improving situation on the labour market makes Fed more likely to taper at a more substantial rate and raise rates next year. Traders in the futures markets moved up their expectations for the first Federal Reserve interest rate hike to July from September. Now market attention will focus on the Treasury curve which is showing a narrowing between long end yields, like the 30-year and the shorter end, like the 5-year, which reflects more hawkish Fed assumptions.
