United States, the Federal Reserve will raise interest rates. But it will not be easy to calm inflation

United States, the Federal Reserve will raise interest rates.  But it will not be easy to calm inflation

Meeting Federal Reserve The expected rise in interest rates is once again frightening the US markets, which, as often happens, drags the European markets as well. Attention is stimulated on the evening of tomorrow, September 21, when (20:00 Italian time) the President of the US Central Bank, Jerome PowellThe press conference will be held, after a decision monetary policy From FOMC (Federal Open Market Committee).

Analysts expect an increase 75 basis points, although they do not rule out (with a probability of 20%) that this move will be more aggressive. As usual, everything will depend on the analysisinflation. High or prolonged inflation is collapsing consumer and business expectations for growth, a situation the central bank will want to avoid at all costs.

Three reasons why inflation continues to rise

The US CPI in August was 8.3%, down from 8.5% in July and 9.1% in June. However, according to Payden & Rygel experts, inflation will not fall easily in the coming months.

Almost all commodity price categories rose in August: from energy to food, from medical services to rents. show inflationary pressures Makes a rapid slowdown unbearable.

Second, some categories have worsened further, with a greater potential for upside. For example, 40% of the increase in core consumer prices over the past 12 months is due to housing. In August, housing rose 0.7% month-on-month, the fastest growth rate since 1955. Experts believe that They will keep adding pressure up toConsumer Price Index baseline until the summer of 2023. “Probably,” stresses Jeffrey Cleveland, chief economist at Payden & Rygel, that “the worst is yet to come.”

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Third, proxy measures of core inflation help in calculating and predicting the actual core inflation rate Where can inflation go in a year. Again, the news is not good. For example, the Cleveland Fed’s median price index rose 0.7% in August and 6.7% from a year ago. “Before the release of the August report, we expected the Fed to raise the fed funds rate to 4.25% by early 2023,” continues Payden & Rygel, however, the current trajectory of underlying price pressures suggests higher rate risks and remaining above 4%. For some time “.

The two-year Treasury yield and the dollar hit new highs

Waiting for the Federal Reserve to be more aggressive than expected, the US 2-year Treasury yield reached a new 15-year high on September 20, gaining about 3 basis points and reaching 3.977%, a level that had not peaked Since the end of 2007. The dollar index, which measures the currency against a basket of other major currencies, has reached a new high of 110,181. It is the highest the index has recorded since September 16, when it reached 110.26. The dollar also hit a record high of 10.8979 against the Swedish krona, hitting its highest level against the currency in more than two decades. (All rights reserved)

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