With international oil prices hitting a yearly high day after day, the U.S. Consumer Price Index (CPI) growth rate exceeded market forecasts, raising concerns over a rebound in inflation. The prolonged U.S. Federal Reserve (Fed) tightening is also gaining momentum.
The U.S. Department of Labor announced on the 13th (local time) that the U.S. Consumer Price Index (CPI) rose 3.7 percent year-on-year in August, up from 3.2 percent last month. The figure exceeds market expectations (3.6%). The warning tone has been turned on again for the slowing U.S. prices.
International oil prices, which directly affect prices, broke the year-high of $92.06 a barrel, up $1.42 (1.57%) from the previous day on the ICE Futures Exchange in London. It was the highest in 10 months since November 16 last year ($92.86). On the New York Mercantile Exchange, West Texas Intermediate (WTI) for October delivery also closed at USD 88.84 a barrel, up USD 1.55 (1.78%) from the previous session, the highest level of the year. It rose 33.11% compared to the low point in March this year.
The U.S. September CPI rose 0.6% month-on-month, increasing from 0.2% last month. It meets market forecasts, but it is the largest increase since July last year. Energy prices seem to be largely due to a 5.6% increase from the previous month. In addition, the core CPI growth rate, excluding energy and food prices, also added a warning tone. It was 4.3% year-on-year, down from 4.7% in July, but rose 0.3% month-on-month, exceeding market expectations (0.2%).
The U.S. CPI in August has drawn keen attention from the market as it can gauge the Fed’s policy path in November. The market expects the Federal Open Market Committee (FOMC) meeting on the 19th and 20th to freeze the key interest rate at 5.25% to 5.50%. The problem is the FOMC in November. A further rate hike cannot be ruled out as prices have signaled a re-rising on the back of soaring oil prices and a strong labor market. Fed Chairman Jerome Powell stressed in a speech at the Jackson Hole Central Bank’s annual policy symposium last month that he is “ready to make further increases if necessary.” Immediately after the CPI announcement, interest rate futures investors forecast a roughly 45% chance of a hike by November, according to FedWatch on the Chicago Mercantile Exchange
