U.S. October CPI added a new "tightening spell" to FED, gold short-term jumped 15 US dollars

GMT+8 At 21:30 on Wednesday (November 10), the United States announced October inflation data, which far exceeded expectations and previous values. The Fed is facing greater pressure to accelerate monetary policy tightening. As of press time, spot gold rose more than 15 US dollars to 1,841.76 US dollars per ounce; the US dollar index jumped nearly 20 points to 94.440.



The US October CPI surged 6.20% year-on-year, far exceeding the expected 5.90% and the previous value of 5.40%; the October core CPI recorded 4.60%, which was also much higher than the expected value of 4.30% and the previous value of 4%. The U.S. October seasonally adjusted CPI monthly rate recorded 0.9%, a new high since June 2021. In the same period, the number of initial claims for unemployment benefits in the United States as of November 6 was 267,000, which was the lowest since the week of March 7, 2020.

The strong increase in U.S. producer prices in October, which was first announced on Tuesday (November 9), was aided by the sharp rise in retail prices of gasoline and motor vehicles. This indicates that high inflation may continue for a period of time when the global supply chain is strained due to the epidemic. time.

A White House official said that US President Biden met with the CEOs of Wal-Mart, UPS, FedEx and Target on Tuesday to discuss speeding up delivery. And lower consumer prices. Biden is facing political pressure due to rising prices, and he has been working hard to eliminate transportation bottlenecks.

Fed Chairman Powell said on Tuesday that the Fed will consider various indicators when measuring how close the economy is to full employment. He reiterated the benefits of focusing on workers who are often still on the sidelines. “When we assess whether we are at maximum employment, We will deliberately review a series of indicators."

Powell said that in doing so, the Fed is concerned about differences in the labor market, "not just the overall numbers." He pointed out that when as many people as possible can work, the economy will be healthier and stronger.

Powell also said last week that although it is uneasy about higher-than-expected inflation, the Fed will remain patient and prioritize further maximizing employment before raising interest rates. Fed officials generally believe that strong economic growth and job growth prove that the economy can start to reliance on its own.

The Fed's decision-makers have heated debates

Dovish: raising interest rates too early is too risky

The two most dovish policymakers of the Fed said on Tuesday that they expect that the economic outlook will become clearer after next summer, when the Fed will end its asset purchase program. But they cannot be sure whether interest rates should remain near zero for a year or more, or whether they should join the ranks of decision makers in favor of faster rate hikes. The former depends on whether inflation has begun to weaken as they expected, and the latter depends on whether workers have poured into the labor market as they have long hoped.

Minneapolis Federal Reserve Chairman Kashkari is the only Fed policymaker who called in September to maintain interest rates at the current near-zero level until 2024. He said on Tuesday that the epidemic is still disrupting the global economy, and even though the recent surge in infections in the United States has subsided, he maintains an "open attitude" to monetary policy.

Kashkari said that inflation is much higher than the 2% target set by the Federal Reserve, but it is driven by some temporary factors-supply chain disruption and the surge in demand following the reopening of the economy. The duration is longer than previously thought.

He said: "I am optimistic that we will get more information in the next three, six, and nine months," and clarified whether the millions of workers who left the labor market during the pandemic will return. If they don’t, “that will make me even more worried that the high inflation data we see may continue.”

Earlier Tuesday, San Francisco Fed President Daley also set the clock in mid-2022. Although she acknowledged that this may be a "challenging period" where consumers must pay more for gasoline, food and other necessities of life, she emphasized: "Let us be patient with policies and wait for the inflation triggered by the pandemic. Will it subside as expected."

She said that raising interest rates too early will not help lower prices, but it will definitely reduce the pace of employment growth. Big. I think that the summer of 2022 should be the time for us to determine whether inflation will continue, whether the labor supply is really as tight as employers say, or whether the improvement of the public health environment will prompt more people to return to employment. market."

Sonal Desai, chief investment officer of Franklin Templeton's fixed income, believes that this ultimately comes down to the labor supply situation in the post-epidemic era. How quickly can job seekers returning to the labor market prevent inflation from soaring and triggering a spiral in wages.

But Desai also admitted that it may take longer than the market anticipates to make an assessment. “For now, it is best for investors to prepare for weak labor supply, continued inflation and increased volatility in financial assets.”

Hawks: Shorten the time for policy evaluation

Some important economic signals in the United States contradict each other. For example, prices and wages have risen sharply, but it is estimated that the number of jobs in the United States is still at least 5 million less than before the outbreak of the new crown, and the labor participation rate has stagnated at 61.6%, which is far lower than the level before the outbreak.

There is growing debate among policymakers about how many more jobs the economy can add and how long high inflation can be tolerated. Many investors worry that underestimating the pressure of price increases may make costly mistakes. St. Louis Fed President Brad reiterated his hawkish view on Monday (November 8) that interest rates will be raised twice before the end of 2022.

Although Chicago Fed President Evans believes that the supply shortage that causes inflation will subside on its own, he has become less certain than three or four months ago, and he has set a schedule to prove his expectations. By next spring, we will learn more about this. If I still give the same reason by then, I am making excuses, and it certainly doesn’t sound right at that time."

Deutsche Bank strategist Jim Reid said in a morning report to clients: "Much depends on whether current inflation is temporary. For 2022, this must be an extremely important but difficult question to answer."