Zhongxin Finance, February 12 (Reporter Li Jinlei) Prices in the United States have gone crazy.
The latest data showed that the U.S. consumer price index (CPI) rose 7.5% year-on-year in January, hitting a 40-year high since February 1982.
Even after excluding volatile food and energy prices, the U.S. core CPI rose 6 percent in January from a year earlier, the largest year-on-year gain since August 1982.
Facing crazy prices, U.S. President Biden couldn’t sit still and issued an emergency statement: “Although the inflation data is high, forecasters continue to predict that the inflation rate will ease significantly by the end of 2022”, trying to appease the market and consumers.
But in the face of high prices, will American consumers buy it?
The declining support rate is in stark contrast to the rising prices.
Data map: A supermarket in the San Francisco Bay Area.
Photo by China News Agency reporter Liu Guanguan
Why are U.S. prices soaring?
The Associated Press analysis believes that labor shortages, massive government aid, ultra-low interest rates and strong consumer demand have led to persistently high inflation pressures last year.
For now, labor shortages and supply chain bottlenecks will continue to keep inflation going.
"Inflation in the United States has reached a new high, which is a comprehensive inflation, which is difficult to solve in the short term." Wen Bin, chief researcher of Minsheng Bank, told China-News Financial reporter that various factors pushed up the inflation level of the United States in January, including rising energy prices, Food prices have risen, rents have risen, and house prices have hit record highs.
In addition, due to the lack of cores, the demand for second-hand cars is strong, driving the price of second-hand cars to soar.
Specifically, in January, US energy prices rose by 27% year-on-year, used car prices soared by 40.5% year-on-year, housing prices increased by 4.4% year-on-year, and food prices increased by 7% year-on-year.
Wen Bin believes that, in general, after the outbreak of the epidemic, the contradiction between supply and demand in the US market has intensified. On the one hand, the supply chain is blocked, including trade and transportation, resulting in insufficient supply; on the other hand, under large-scale stimulus policies, demand remains strong.
The imbalance between supply and demand and the widening gap between supply and demand have led to the continued rise in inflation data.
In addition, Wen Bin said that the U.S. economy began to recover after the epidemic period, but the labor force participation rate has not returned to the level at the beginning of the epidemic. The shortage of labor has brought labor wages up, which has become a new factor driving up inflation.
Sheng Songcheng, a professor at China Europe International Business School and former director of the Investigation and Statistics Department of the People's Bank of China, also believes that the new crown epidemic has hit the US supply chain and caused supply shortages.
For example, you go shopping in a supermarket in the United States and find that the quantity of bread is decreasing, and the price of natural bread is going up.
According to US media reports, a number of US companies said that the current supply chain problems are expected to continue into the second half of this year, so in the face of rising costs, companies can only continue to raise prices.
Data map: Customers wear masks to shop in a Walmart supermarket in Sugar Land (Sugar Land) in the Houston area of Texas.
Photo by China News Agency reporter Zeng Jingning
rate hike or more
In the face of soaring inflation, the Fed is expected to further increase interest rates.
Federal Reserve Chairman Jerome Powell recently revealed that the Fed may raise interest rates several times this year to deal with inflation, and the earliest rate hike will likely be in March.
Wen Bin pointed out that the Fed may start the process of raising interest rates and shrinking its balance sheet simultaneously. The market is expected to raise interest rates 2 to 3 times by the end of 2021, and it is currently raised to 3 to 4 times. The rate of interest rate hikes is also expected to increase by at least one percentage point.
The March interest rate meeting is likely to raise interest rates by 50 basis points. If realized, it will be the first time since 2000 that the rate hike will reach 0.5 percentage points.
According to foreign media reports, a Fed official with voting rights on monetary policy said on the 10th that he supports the Fed to raise interest rates by 100 basis points before July 1 this year to deal with the continued soaring inflation rate.
What will be the impact of Fed rate hikes?
Wen Bin analyzed that due to the current inflationary pressure, the Federal Reserve may increase the intensity of monetary contraction, which will bring new uncertainties and risks to the US and global financial markets, and impact the stock and bond markets.
This round of U.S. stock market gains is mainly led by growth stocks and technology stocks. As inflation continues and expectations of monetary policy tightening increase, growth stocks and technology stocks have been hit hard, and it is expected that the U.S. stock market will adjust for some time.
Inflation exploded and expectations of interest rate hikes intensified, US stocks and US bonds ushered in a huge shock, the three major stock indexes fell in shock, US bonds fell sharply, and the 10-year US bond yield broke the 2% mark.
How does China respond?
Wen Bin believes that high international commodity prices will also bring imported inflationary pressure to China's domestic prices to a certain extent.
However, China has stepped up efforts to ensure supply and stabilize prices to prevent adverse effects on the production and operation of downstream small and medium-sized enterprises.
Since last year, the effect of ensuring supply and stabilizing prices has been relatively obvious.
Data show that China's CPI for the whole year of 2021 will increase by 0.9%.
"Even if commodity prices remain high this year, the impact on domestic inflation is expected to be controllable." Wen Bin pointed out that China's grain harvests have been bumper in the short term, and pork prices will be difficult to recover in the short term. In the short term, CPI will not constitute a monetary policy. Constraints.
The National Development and Reform Commission recently issued a document stating that global high inflation may continue for a period of time, but with the shift of monetary policy in major economies and the narrowing of the supply and demand gap, international commodity prices continue to rise sharply, lack of momentum, and inflationary pressure is expected to weaken marginally.
According to comprehensive research and judgment, China's prices will maintain a solid foundation in 2022, and it is expected that the CPI will continue to rise moderately.
Wen Bin suggested that at present, China's monetary policy should proceed from its own inflation, employment and other conditions, and maintain strategic focus.
At present, the effect of the pre-approval of macro policies has begun to show, and new credit and social financing in January hit a new monthly high.
However, the consumption willingness of the residential sector is insufficient, and it is necessary to increase counter-cyclical control, especially the combination of fiscal and monetary policies, encourage investment and consumption, expand domestic demand, and ensure that the economy operates within a reasonable range.
"In general, the policy adjustment of developed economies has limited impact on my country." Sun Guofeng, director of the Monetary Policy Department of the People's Bank of China, recently said that the next step, the People's Bank of China insists on keeping the word stable and focusing on me, and grasps a stable currency according to the domestic situation. The intensity and rhythm of the policy, actively and prudently respond to the adjustment of the monetary policy of the developed economies.
(Finish)