{"id":45266,"date":"2022-06-10T19:03:08","date_gmt":"2022-06-10T19:03:08","guid":{"rendered":"https:\/\/harchi90.com\/catastrophically-bad-inflation-report-is-boosting-chances-of-a-75-basis-point-interest-rate-hike-next-week\/"},"modified":"2022-06-10T19:03:08","modified_gmt":"2022-06-10T19:03:08","slug":"catastrophically-bad-inflation-report-is-boosting-chances-of-a-75-basis-point-interest-rate-hike-next-week","status":"publish","type":"post","link":"https:\/\/harchi90.com\/catastrophically-bad-inflation-report-is-boosting-chances-of-a-75-basis-point-interest-rate-hike-next-week\/","title":{"rendered":"‘Catastrophically bad’ inflation report is boosting chances of a 75-basis-point interest-rate hike next week"},"content":{"rendered":"
\n

Friday’s consumer-price index report for May – which showed the annual headline US inflation rate climbing to 8.6% in May, with few signs of having peaked – is boosting the chances of a jumbo-sized rate increase by monetary-policy makers as soon as next week, and eliciting dire warnings that central bankers have completely lost control of prices. <\/p>\n

Fed funds futures traders now see a 21% chance of a 75-basis-point hike in June, up from just 3.6% on Thursday, according to the CME FedWatch Tool. Economists at Barclays BARC,
\n -3.69%<\/bg-quote>
\n and Jefferies backed up the shifting expectations, by indicating they expect policy makers to deliver a hike of that magnitude at their June 14-15 meeting.<\/p>\n

Beneath the issue of where the Fed goes from here is a much more fundamental and serious problem: Some observers fear the US central bank has already effectively lost control of inflation. May’s price gains were broad-based – hitting everything from shelter to gasoline and food, as well as the narrower gauge, the so-called core reading, that excludes food and energy. The data were \u201ccatastrophically bad\u201d for both the Fed and Americans, said Nancy Tengler, chief executive and chief investment officer of Nashville-based Laffer Tengler Investments, which oversees $ 1.1 billion.<\/p>\n

\n

Opinion: <\/strong>Inflation is now concentrated in the necessities of life<\/p>\n

Also see:<\/strong> Biden to give speech on soaring prices as inflation rate hits a fresh 40-year high<\/strong><\/p>\n

“What we saw in this report which was disappointing and a little alarming is that the core reading, excluding food and energy, came in hotter than expected and that’s after we dropped off from a very high number for April 2021,” she said via phone . \u201cThis is a much more persistent and stickier kind of <\/em>inflation that takes years to work through the system. ” <\/p>\n

\u201cThe Fed has been wrong at every single turn and we should be seeing a 75 basis point hike at the June meeting,\u201d Tengler said. “The question is whether they can surprise and I don’t think we are going to see that. Every time they delay, that allows inflation to run rampant and this raises the odds of recession. ” Equity markets will be “ugly and choppy through summer because inflation numbers are not going to improve.”<\/p>\n

Indeed, traders of derivatives-like instruments known as fixings have expected a string of annual headline CPI readings that rises to as high as 8.8% in August and September, before settling to 8% for October. Meanwhile, US consumer sentiment plunged to a record low this month.<\/p>\n

Below is a roundup of the reaction to Friday’s CPI data:<\/p>\n

September outlook<\/h6>\n

“All in all, the report should be of great concern for the Fed given that price gains in both the headline and the core measures show no signs of abating, and we expect prices to continue to register firm gains in the near term,” TD Securities strategists Oscar Munoz, Priya Misra and others wrote in a note. “We expect the Fed to maintain its aggressive tightening bias in the months ahead, look for the Committee to hike rates by 50bp both next week and in the July FOMC meeting, and believe a 50bp hike in September may not be out of the question. “<\/p>\n

A team at Goldman Sachs Group Inc. GS,
\n -4.87%<\/bg-quote>,<\/span>
\n led by Jan Hatzius, agreed with TD’s September assessment, by saying “we now expect the Fed to hike the funds rate by 50 bps in September (vs. + 25bp previously), in addition to + 50bp moves in June and in July.”<\/p>\n

“Today’s report should extinguish any pretense that a ‘pause’ in rate hikes will likely be appropriate by the end of summer, as the Fed is clearly still behind the eight ball on bringing inflation under control,” said Jason Pride, chief investment officer of private wealth at Glenmede.<\/p>\n

\u201cInvestors should expect the Federal Reserve to continue on its 50-bp rate hike path next week and beyond until inflation shows meaningful signs of decelerating toward the Fed’s 2-3% target range,\u201d Pride said.<\/p>\n

May report was a `doozy ‘<\/h6>\n

\u201cToday’s CPI report was a doozy,\u201d said Tom Graff, head of investments at Facet Wealth. <\/p>\n

\u201cWhile we knew the headline number would probably come in high due to food and energy prices, consensus was that the month-over-month Core CPI would slow sequentially,\u201d he wrote in an email. “Unfortunately that didn’t happen. Headline CPI came in a full 1% for the month and a 40-year high 8.6% for the year, and core stayed steady at + 0.6% for the month and 6.0% for the year. ” <\/p>\n

\u201cThe most concerning part of this report was its breadth. The monthly number wasn’t driven by a few items. Most of the major categories actually accelerated price increases month-over-month. Most observers agree that broader inflation is more likely to persist. “<\/p>\n

Out of control<\/h6>\n

\u201cFriday’s inflation data suggests the ‘peak inflation’ debate may be premature,\u201d said Nancy Davis, founder of Quadratic Capital Management. “The idea of \u200b\u200bpeak inflation assumes that our supply chain disruptions are over and won’t recur anytime soon and I’m not so sure we can be confident of that.”<\/p>\n

\u201cInvestors remain too confident that the Federal Reserve will be able to control inflation,\u201d Davis said by email. “We should not take the Fed’s ability to control inflation as a given.”<\/p>\n<\/p><\/div>\n<\/div>\n

.<\/p>\n","protected":false},"excerpt":{"rendered":"

Friday’s consumer-price index report for May – which showed the annual headline US inflation rate climbing to 8.6% in May, with few signs of having peaked – is boosting the chances of a jumbo-sized rate increase by monetary-policy makers as soon as next week, and eliciting dire warnings that central bankers have completely lost control …<\/p>\n

‘Catastrophically bad’ inflation report is boosting chances of a 75-basis-point interest-rate hike next week<\/span> Read More »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","spay_email":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true},"categories":[8],"tags":[185,8580,5415,5419,5416,329,201,5414,566,627,2603,2590,202,5417,319,6411,19970,2604,10415,3326,519,533,322,626,10416,6494,19969],"jetpack_featured_media_url":"","jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"fifu_image_url":"https:\/\/images.mktw.net\/im-561757\/social","_links":{"self":[{"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/posts\/45266"}],"collection":[{"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/comments?post=45266"}],"version-history":[{"count":0,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/posts\/45266\/revisions"}],"wp:attachment":[{"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/media?parent=45266"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/categories?post=45266"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/tags?post=45266"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}