US CPI fell slightly in August, spot gold jumped more than 9 US dollars short-term

GMT+8 On Tuesday (September 14) at 20:30, the United States announced August inflation data, which has fallen back from the previous value, alleviating the market's expectation that the Fed will start to reduce debt purchases as soon as possible. As of press time, spot gold jumped more than 9 US dollars to 1,793.57 US dollars per ounce, with a cumulative fluctuation of nearly 11 US dollars.


Specific data show that the US CPI annual rate in August was flat at 5.30%, down 0.1% from the previous value; the core CPI (excluding energy and food prices) in the US recorded an annual rate of 4% in August, down 0.3% from the previous value. 4.20% lower than expected value.

The data will set the tone for the Fed's policy meeting next week. The Fed will meet next Tuesday and Wednesday, and the outside world is generally expected to discuss reducing its bond purchase plan, but it will not officially announce its plan until later this year.

In recent weeks, some Fed officials have stated that they believe that the central bank should start reducing the $120 billion monthly bond purchases as soon as possible. But Fed Chairman Powell has said that he hopes to see a stronger employment report before the scale reduction is announced.

However, despite the slowdown in inflation growth in August and the previously announced employment report was weaker than expected, the warning about rising inflation cannot completely dispel the Fed’s concerns. According to the New York Times, this year, the Biden administration expects inflation to reach the highest level since the early 1980s. The U.S. Budget Office stated that officials now estimate that it will reach 4.8% this year, more than double the initial forecast.

Veronica Nigh, a senior economist with the U.S. Agricultural Bureau Federation, said this is “not necessarily surprising” because of the large number of people who were able to work from home and save money during the peak of the pandemic. “They All the money saved is spent, so of course this will have inflationary pressure on prices."

Some market professionals worry that the rise in inflation may last longer than Fed officials expected. Ben Jeffery, a US interest rate strategist at BMO, pointed out that he expects the Fed to push up interest rates faster than expected.

CIBC Private Wealth US Chief Investment Officer David Donabedian said that he is observing whether temporary sources of inflation related to the new crown epidemic (such as hotels and air tickets) are beginning to ease, or whether inflation is caused by a shortage of supply.

Donabedian added that supply chain problems now seem to be more serious than three months ago, and he expects inflation to continue to be a problem. He is observing whether there will be more lasting evidence of rising inflation, such as rising rents.

CFRA chief investment strategist Sam Stovall said: "The Federal Reserve has always said that they think inflation is temporary. However, the inflation situation is getting worse... I think investors are trying to decide whether this worry will be more, rather than nothing. "He expects that the Fed will not officially announce its withdrawal from the bond purchase program until November, and will eventually lay the foundation for interest rate hikes.

Consumers' inflation expectations for the next three years rise to a new high in nearly eight years

A survey released by the Federal Reserve Bank of New York on Monday (September 13) showed that US consumers' expectations of how inflation will change next year and the next three years rose to the highest level since 2013. The report is based on a rotating group of 1,300 households.

According to the monthly survey of consumer expectations, the median inflation expectations for the full year in August rose to 5.2% for the 10th consecutive month, and the median inflation expectations for the next three years rose to 4.0%. The survey was launched in 2013, and both indicators hit the highest level ever.

U.S. central bank officials are paying close attention to inflation expectations as they try to assess whether the upward pressure on prices caused by the coronavirus pandemic will pass or have a more lasting impact on the economy. Several policymakers said that despite the slowdown in employment growth in August, they expect the Fed to start reducing asset purchases later this year.

Some policymakers said that if inflation lasts longer than expected, the sooner the Fed ends the large-scale asset purchase program launched last year to support the market and the economy, the more options officials will have to deal with the future.

A survey by the Federal Reserve Bank of New York shows that consumers are raising their expectations of what they might need to spend on housing, food and other necessities next year. The survey found that expectations of how much house prices will rise next year fell again for the third consecutive month in August, but the median value is still at a high of 5.9%. Food prices are expected to rise by 7.9% next year, up from 7.1% in July. Rents are expected to rise by 10% in the next 12 months, and medical prices are expected to rise by 9.7% next year—both by 0.2 percentage points from July.

An aging population, a long-term signal of rising inflation

Extensive research by Mikael Juselius of the Bank of Finland and Elod Takats of the Bank for International Settlements provides a compelling case for the link between the age composition of a country and inflation. Their conclusions indicate that as the baby boomer population ages and retires, the inflation situation in the United States may undergo a major shift.

As the American working-age population continues to age, the medical history looks very bad. Since 1976, the working population in the United States has grown by 1.2% per year in the 1990s. However, after the financial crisis, it started to slow down significantly. In the past five years, it has grown by only 0.1% per year.

The Juselius and Takats study extracted data from 1870 to 2016 from 22 advanced economies. Although existing research focuses on data after the First World War, this longer period of time allows for more reliable conclusions to be drawn in a series of business cycles. They found that when the working-age population is large and the productivity is slightly higher than the consumption power, inflation tends to be well controlled; conversely, when the ratio of minors to the elderly is too high, the consumption trend is obvious and the output is short, inflation starts Get angry.

Although central banks are concerned about inflation expectations, they may have a better understanding of the situation by inferring the current demographic structure to determine the tipping point that may trigger inflation. In the United States, the demographic trends of the baby boom generation seem to be a leading indicator. Although research emphasizes that baby boomers helped curb inflation as they expanded the workforce, they may be counterproductive when they retire.

Peter Berezin of BCA Research also emphasized this point. He emphasized how baby boomers control more than half of the wealth of American households. This has brought them a huge impact on consumption. When they retire, they may continue to spend and contribute little to production. This imbalance will trigger inflationary pressures.