Anadolu Agency – While inflation in the USA, which showed the fastest rise in 39 years, continues to be a source of concern, analysts state that the possibility of the US Federal Reserve (Fed) to increase the pace of monetary tightening is getting stronger.
The world’s largest economy, the USA, continues to struggle with inflation after the shock caused by the new type of coronavirus (Covid-19) epidemic.
Supply bottlenecks, turmoil in labor markets, base effect and strong consumer demand following the re-normalization of economies are listed as the causes of inflationary pressures around the world, including in the USA.
The latest data from the US Department of Labor revealed that inflation in the country reached its peak in 39 years in November.
While the Consumer Price Index (CPI) increased by 0.8 percent monthly in November, exceeding expectations, it increased by 6.8 percent on an annual basis, in line with expectations.
The annual rise in the cost of living for American consumers marked the fastest rise since 1982 during this period.
The rise in energy prices remained at the top
Increases in energy, housing, food, second-hand and new vehicle prices continued to be influential in the rise in consumer prices in November.
The energy index, which continued to see the highest increase in this period, increased by 3.5 percent on a monthly basis and increased by 33.3 percent annually.
While the rise in food prices continued to be one of the driving forces of inflation, food inflation was 0.7 percent monthly and 6.1 percent annually in November.
The cost of housing for Americans also rose 0.5 percent monthly and 3.8 percent annually over the same period.
Other items that attracted attention with price increases were second-hand and new vehicles, while new vehicle prices increased by 1.1 percent monthly and 11.1 percent annually in November. While the increase in used vehicle prices was calculated as 2.5 percent per month, it reached 31.4 percent on an annual basis.
Eyes on the Fed’s meeting next week
U.S. President Joe Biden stated that inflation figures reflect the pressures faced by economies around the world, and argued that inflation has peaked and prices will decrease in the coming months.
Pointing out that the November inflation data did not reflect the recent decreases in some prices, including energy, Biden said that the developments in the weeks after the November data were collected show that the price and cost increase slowed down, though not at the desired pace.
Analysts pointed out that inflation remained above the Fed’s 2 percent target for 9 consecutive months, adding that the global commodity rally, increasing demand, wage pressures, supply chain disruptions and the low base effect compared to last year continued to push prices up.
While Fed Chairman Jerome Powell and US Treasury Secretary Janet Yellen began to abandon the assessment that inflation is “temporary”, it was noted that inflation concerns strengthened the possibility of an acceleration in the tightening in the US monetary policy.
Analysts stated that after Powell’s verbal guidance and the latest inflation data, the attention in the markets was turned to the decisions that will come out of the Federal Open Market Committee (FOMC) meeting that will take place on 14-15 December.
“November will probably be the peak of inflation”
Moody’s Analytics Chief Economist Mark Zandi told Anadolu Agency (AA) that high inflation was caused by supply-side disruptions such as global supply chain problems and workforce shortages caused by the Covid-19 outbreak, especially the Delta variant.
Stating that inflation will moderate with the decrease of the epidemic, Zandi said, “November will probably be the peak of inflation.” made its assessment.
Zandi noted that inflation increased in most items compared to last year, but the biggest price increases were seen in gasoline, heating and vehicle prices.
Pointing out that gasoline and heating costs have decreased in recent weeks, Zandi noted that vehicle production has started to rise as the supply chain has settled.
Noting that prices are expected to start falling early next year, Zandi said, “Inflation should be approaching the Fed’s inflation target by this time next year. The only part of high inflation that will remain constant is rents, but it goes to the affordable housing crisis that was the pre-pandemic problem.” he said.
“We expect price pressures to continue to widen across the country”
ING International Chief Economist James Knightley also stated that there are concerns that November inflation will rise above 7 percent, but that the data is in line with market forecasts.
Stating that a further increase in annual rates is likely, Knightley noted that core inflation is expected to rise by 6 percent on an annual basis.
“We expect price pressures to continue to widen across the country,” Knightley said. said.
Pointing out that the Fed’s concern is that high inflation will fuel higher inflation expectations, Knightley stated that this can feed wage demands and that these costs will be passed on to the customer in an environment where there is reasonable institutional pricing power.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.