US inflation rose sharply, market eyes 0.5% interest rate hike next month
Skip to main content
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
  • Epaper
  • More
    • Subscribe
    • COVID-19
    • Bangladesh
    • Splash
    • Videos
    • Games
    • Long Read
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
The Business Standard

Thursday
July 07, 2022

Sign In
Subscribe
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
  • Epaper
  • More
    • Subscribe
    • COVID-19
    • Bangladesh
    • Splash
    • Videos
    • Games
    • Long Read
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
THURSDAY, JULY 07, 2022
US inflation rose sharply, market eyes 0.5% interest rate hike next month

USA

Reuters
10 February, 2022, 08:40 pm
Last modified: 10 February, 2022, 08:46 pm

Related News

  • US yield curve inverts again: What is it telling us?
  • As US current account gap balloons, new currency war may be a skirmish
  • What's new with the Fed's bank stress tests in 2022
  • What Americans face now as the Fed raises interest rates
  • US stocks' bear market growl could beckon recession

US inflation rose sharply, market eyes 0.5% interest rate hike next month

The consumer price index gained 0.6% last month after increasing 0.6% in December, the Labor Department said on Thursday. In the 12 months through January, the CPI jumped 7.5%, the biggest year-on-year increase since February 1982

Reuters
10 February, 2022, 08:40 pm
Last modified: 10 February, 2022, 08:46 pm
A shopkeeper works inside his retail store as the phase one reopening of New York City continues during the outbreak of the coronavirus disease (Covid-19) in the Brooklyn borough of New York City, New York, US June 9, 2020.
A shopkeeper works inside his retail store as the phase one reopening of New York City continues during the outbreak of the coronavirus disease (Covid-19) in the Brooklyn borough of New York City, New York, US June 9, 2020.

US consumer prices rose solidly in January, leading to the biggest annual increase in inflation in 40 years, which could fuel financial markets speculation for a 50 basis points interest rate hike from the Federal Reserve next month.

The consumer price index gained 0.6% last month after increasing 0.6% in December, the Labor Department said on Thursday. In the 12 months through January, the CPI jumped 7.5%, the biggest year-on-year increase since February 1982.

That followed a 7.0% advance in December and marked the fourth straight month of annual increases in excess of 6%. Economists polled by Reuters had forecast the CPI rising 0.5% and accelerating 7.3% on a year-on-year basis.

Effective with the January report, the CPI was re-weighted based on consumer expenditure data from 2019-2020.

The economy is grappling with high inflation, caused by a shift in spending to goods from services during the Covid-19 pandemic. Trillions of dollars in pandemic relief fired up spending, which ran against capacity constraints as the coronavirus sidelined workers needed to produce and move goods to consumers.

Soaring inflation has reduced purchasing power for households and eroded President Joe Biden's popularity. This is despite the economy growing at its strongest rate in 37 years in 2021 and the labor market rapidly churning out jobs.

The Fed is expected to start raising rates in March, to rein in inflation, which has overshot the US central bank's 2% target. Financial markets are predicting a 25% chance of a 50 basis points increase, according to CME's FedWatch tool.

Market predictions are partly driven by the fact that price pressures are broadening, with several measures of wage inflation increasing strongly in recent months.

Economists, however, believe it is unlikely that the Fed would move so aggressively. They expect the central bank to raise rates by 25 basis points at least seven times this year.

"The Fed does not want to create undue volatility in its first hike, which only makes further increases more difficult," said Scott Ruesterholz, a Portfolio Manager at Insight Investment in New York. "Rather, the Fed would be more likely to guide to an accelerated pace of hikes at consecutive meetings to crack down on inflation."

Strong underlying inflation 

Excluding the volatile food and energy components, the CPI increased 0.6% last month after rising 0.6% in December. In the

12 months through January, the so-called core CPI jumped 6.0%. That was the largest year-on-year gain since August 1982 and followed a 5.5% advance in December.

Rising rentals and shortages of goods like motor vehicles are fueling the core CPI. Monthly inflation could slow in the coming months amid an easing in supply bottlenecks as coronavirus infections driven by the Omicron variant subside.

Government data this week showed goods imports increased to a record high in December as ships offloaded their cargo after months of delays because of labor shortages at ports. Wholesale motor vehicle inventories increased by the most in 10 years in December. read more

Still, inflation will remain high for a while, in part reflecting the delayed impact of rising wages. Employers are boosting compensation as they compete for scarce workers. There were 10.9 million job openings at the end of December.

"The factors that have driven inflation higher in 2021

are only expected to dissipate gradually and are likely to keep pushing inflation higher through the first half of 2022," said Kevin Cummins, chief US economist at NatWest Markets in Stamford, Connecticut.

"We expect that there will be a shift from goods inflation, particularly motor vehicle and commodities prices to more persistent services inflation, such as wages and heavily-weighted rents."

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits fell16,000 to a seasonally adjusted 223,000 for the week ended 5 February. Economists had forecast 230,000 applications for the latest week. Claims increased from the beginning of January through the middle of the month as Omicron raged across the country.

They have dropped from a record high of 6.149 million in early April of 2020.

Top News / World+Biz / Global Economy

US inflation / US inflation hike / US economy

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • An LNG tanker at Fauji Oil Terminal & Distribution Co. Ltd. in Karachi.Photographer: Asim Hafeez/Bloomberg
    Pakistan’s $1b gas tender flop to worsen energy crisis
  • Boris Johnson quits as UK prime minister, dragged down by scandals
    Boris Johnson quits as UK prime minister, dragged down by scandals
  • Representational image. Picture: Pixabay
    Dhaka Wasa hikes water prices by 5%

MOST VIEWED

  • Rubble is cast around the Georgia Guidestones after an explosion in Elberton, Georgia, U.S., July 6, 2022 in a still image from video. ABC Affiliate WSB-TV via REUTERS
    Explosion rocks Georgia Guidestones, dubbed 'America's Stonehenge'
  • FILE PHOTO: A worker is seen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 28, 2020. REUTERS/Brendan McDermid
    Wall St opens higher as investors assess rate outlook
  • US Chairman of the Joint Chiefs of Staff General Mark Milley. Photo: Reuters
    Top US general speaks with Chinese counterpart
  • Head of delegates prepare for a meeting on the last day of the G20 finance ministers and central bank governors meeting in Jakarta, Indonesia, February 18, 2022. Mast Irham / Pool via REUTERS
    US keen to prevent G20 disruption, avoid legitimising Russia actions
  • The logo of Amazon is seen at the company's logistics center in Bretigny-sur-Orge, near Paris, France, 7 December, 2021. PHOTO: REUTERS/Gonzalo Fuentes
    Amazon makes Grubhub deal to give Prime members fee-free food
  • U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/File Photo
    King Dollar stands tall as recession fears churn global markets

Related News

  • US yield curve inverts again: What is it telling us?
  • As US current account gap balloons, new currency war may be a skirmish
  • What's new with the Fed's bank stress tests in 2022
  • What Americans face now as the Fed raises interest rates
  • US stocks' bear market growl could beckon recession

Features

Farsim is keen on listening to what his clients really want; in this profession attention is key. Photo: Noor-A-Alam

Making it as an audio engineer

10h | Pursuit
Illustration: TBS

Applystart: Helping students navigate the maze of foreign university applications

11h | Pursuit
The sea beach in Kuakata. Photo: Syed Mehedy Hasan

Five places in Southern Bangladesh you could visit via Padma Bridge

1d | Explorer
Genex Infosys Limited is the country's largest call centre with more than 2,000 seats and full-set equipment. Photo: Courtesy

How domestic demand made Genex Infosys a BPO industry leader

1d | Panorama

More Videos from TBS

New technology to benefit pilgrims at Hajj

New technology to benefit pilgrims at Hajj

32m | Videos
Load shedding is back

Load shedding is back

12h | Videos
Photo: TBS

Has Russia gained anything in its invasion of Ukraine?

12h | Videos
Behind the story of 'Aske Amar Mon Bhalo Nei'

Behind the story of 'Aske Amar Mon Bhalo Nei'

1d | Videos

Most Read

1
Photo: Collected
Africa

Uganda discovers gold deposits worth 12 trillion USD

2
TBS Illustration
Education

Universities may launch online classes again after Eid

3
Area-wise load shedding schedule will be announced: PM
Bangladesh

Area-wise load shedding schedule will be announced: PM

4
Padma Bridge opens up investment spree in south
Industry

Padma Bridge opens up investment spree in south

5
Build Dhaka East-West Elevated Expressway, relocate kitchen markets: PM
Bangladesh

Build Dhaka East-West Elevated Expressway, relocate kitchen markets: PM

6
File Photo: BSS
Energy

India pulls out of LoC funding for part of Rooppur power transmission work

EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2022
The Business Standard All rights reserved
Technical Partner: RSI Lab
BENEATH THE SURFACE
A boat sails through the River Meghna carrying rice bran, a popular cattle feed, from a rice mill in Ashuganj to cattle markets. There are around 250 rice mills in Ashuganj that produce rice bran. The photo was taken recently. Photo: Rajib Dhar

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net