June 28, 2022

Hardwood Paroxysm

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A record since June 1982 (when Reagan was) – Corriere.it

While inflation is rising in the US and Germany, fears of rising prices are rising in Italy, according to a report in the Parliamentary Budget Office. In the United States in November, the price index rose 6.8%: the highest increase since June 1982 (when Ronald Reagan was in the White House). This was reported by the US Office of Labor Statistics. The monthly variance was 0.8 percent instead. Economists interviewed by Dow Jones estimated the rise at 6.7%, again a record for the past 39 and a half years. In October Inflation rose to 6.2 percent Over the year. This is the ninth month of inflation, more than the central bank’s target (about 2%). The food and energy expenditure price index – which represents core inflation – rose 0.5% on a monthly basis to 4.9% year-on-year from 4.6% in October.

Germany, inflation at 30-year low

Germany’s inflation rate, measured year-on-year in the consumer price index, was + 5.2% year-on-year, up from 4.5% in October. The rate of inflation rose for the sixth consecutive year to a record high in November 2021, said George Thiel, head of the Federal Statistics Office. The highest inflation rate was measured 30 years ago. In June 1992, the inflation rate was + 5.8%. Consumer prices are down 0.2% from October 2021, according to the Federal Statistics Office.


Reagan registration

To find such high inflation in the United States, one has to go to Ronald Reagan’s first position in the White House. In detail, higher prices are driven by energy costs, which account for 33.3% a year (58.1% with an increase in car fuel), and food items (+ 6.4%) and restaurants. (+ 5.8%). Global commodity rallies, rising demand, wage pressures and supply chain disruptions are also factors.

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Sustained inflation risk for economic activity

Inflation is one of the major economic risks in Italy. This was again underlined today, December 10, by the Parliamentary Budget Office. The current rise in inflation, currently driven by rising energy prices and shortages of semi-finished goods – reads the 2022 Budget Policy Statement – may prove even more stable than central banks expected. In this case, the increase in prices may trigger a reaction to monetary policy that will affect the purchasing power of households and adversely affect economic activity.

Eyes on the central bank

Data particularly expected by markets (Piazza Affari data turned negative after release – See the trend here in real time – When Wall Street is positive) sees the potential race price effect on the Federal Reserve’s rate policies in the face of a strong economic trend, and may decide to expedite the so-called tapping. Pressing monetary incentives with a recession in the bond buying program to prevent inflation from heating up further – as Jerome Powell himself acknowledged as governor recently – can no longer be considered a limited and intermediate event. Despite growing strong, inflation data came as no big surprise, which has calmed the sentiment of the markets. The Federal Reserve has already indicated it is ready to intervene, further strengthening the tapping that has just begun, which is expected to result in cuts in property purchases of $ 30 billion per month, compared to $ 120 billion in assets each month.