The U.S. CPI growth rate exceeded expectations in August, how will it affect the Fed's rate hike path?

(Finance and Economics) The U.S. CPI growth rate exceeded expectations in August. How will it affect the Fed's rate hike path?

　　China News Service, Beijing, September 14 (Reporter Chen Kangliang) According to data released by the U.S. Department of Labor recently, the U.S. consumer price index (CPI) rose by 0.1% month-on-month in August and 8.3% year-on-year, both exceeding market expectations and causing concern .

　　Zhu Qibing, an analyst at Bank of China International, said that the strong growth in rent prices was the main reason for the year-on-year and month-on-month growth of the U.S. CPI in August both exceeded expectations.

In terms of year-on-year growth rate, due to the slowdown in energy price growth, the US CPI year-on-year growth rate in August fell, but it was still 0.2 percentage points higher than market expectations.

Among them, rent was the main contribution item, which increased by 6.3% in the month, and contributed 2.1% to the CPI.

In terms of month-on-month growth, the U.S. CPl in August turned positive again by 0.1% after experiencing zero growth in the previous month.

Among them, the growth rate of rent prices is also a major contributor.

　　Dong Qi, an analyst at Guotai Junan, also said that in August, although the year-on-year increase in the overall CPI fell slightly, driven by the decline in energy commodity prices, sub-items such as rents showed the high stickiness of core inflation.

Rent, which weighs close to one-third, rose 0.7% month-on-month in August, the highest increase since 1990.

　　Dong Qi further stated that the tight labor market in the United States will exacerbate the high stickiness of inflation.

As an important part of inflation data, core service prices are affected by factors such as the mutual support of the "wage-inflation" chain, and are expected to slow down slowly, becoming the biggest source of inflation stickiness.

At present, there is still a large gap in the US labor market, the overall situation is still relatively tight, and there is still a lot of upward pressure on wages, which keeps core inflation, especially core service inflation, at a high stickiness.

　　Minsheng Securities analyst Zhou Junzhi also holds a similar opinion.

Zhou Junzhi analyzed that the labor market is the crux of the inflation problem in the United States, and it is difficult to significantly improve in a short time.

Most of the core goods and services inflation in the United States is driven by wage growth, and rent inflation is also closely related to the month-on-month growth of labor compensation.

Therefore, if the imbalance between supply and demand in the US labor market cannot be resolved, US core inflation may continue to rise.

　　How will the better-than-expected inflation data affect the Fed's "pace" of rate hikes?

Zhou Junzhi said that the higher-than-expected CPI in August showed that the road to U.S. inflation was not smooth.

There is basically no suspense that the Fed will raise interest rates by 75 basis points in September, but the probability of the Fed raising interest rates by 100 basis points in September is expected to be low.

The U.S. inflation data for June this year was equally astounding, but the Fed raised interest rates by only 75 basis points at its July meeting, saying the 75 basis point rate hike was an "extraordinarily large rate hike."

Therefore, it is expected that the Fed will continue to raise interest rates by 75 basis points with a high probability at the September meeting.

　　Yu Bo, an analyst at Changjiang Securities, said that although the U.S. CPI year-on-year growth rate has continued to fall in recent months under the influence of the base, the rate of decline in inflation is still slower than expected. In particular, the rise in core inflation growth means that U.S. demand is still hot.

Considering that the chairman of the Federal Reserve has repeatedly emphasized that the Federal Reserve will insist on raising interest rates until inflation returns to a stable level, and the high housing prices in the United States in the early stage caused rents to continue to rise, the subsequent fall in inflation may still be slower than expected. Therefore, it is expected that the Federal Reserve may continue to raise interest rates in September. 75 basis points.

　　Zhu Qibing also held a similar opinion.

Zhu Qibing said that from the CPI data in August, it is not appropriate to underestimate the resilience of US inflation.

As far as energy prices are concerned, the possibility of lower-than-expected growth in crude oil production brings the potential for oil prices to rise, but at the same time, lower-than-expected economic growth may put pressure on oil prices, which means that there is less room for oil prices to continue to fall during the year, which is not conducive to the United States. The alleviation of headline inflation is limited.

Judging from the growth rate of labor costs of non-agricultural enterprises, the current “wage-inflation” spiral is still strengthening, and it is expected that the upward trend in wages will continue to support core inflation in the United States.

Based on the higher-than-expected inflation performance, it is expected that the Fed will raise interest rates by 75 basis points in September, and it does not rule out the possibility of raising interest rates by 75 basis points again in November.

(Finish)