US inflation is exploding again! The culprit is oil prices, will the interest rate hike storm continue?
Securities Times
September 14, 2023 00:24:03 from Guangdong
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Inflation in the United States has exploded again.
On the evening of September 13th, the US Bureau of Labor Statistics released a CPI report that showed that the year-on-year growth rate of the US CPI in August rebounded from 3.2% in July to 3.7%, marking the second consecutive month of year-on-year growth rebound, exceeding the expected 3.6%; The month on month CPI growth rate in August accelerated from 0.2% in July to 0.6%, marking the largest increase in 14 months; The core CPI in the United States, excluding food and energy costs, rose 0.3% month on month in August, marking the first accelerated increase in six months.
The main culprit behind the sudden rise in US CPI in August was oil prices. After Saudi Arabia and Russia announced the extension of their voluntary production reduction deadline, international oil prices have risen by about 20%. Goldman Sachs has warned that if OPEC+continues to extend the production reduction agreement, crude oil prices may climb to $107 per barrel in December 2024, and the US President clearly does not want to see a surge in oil prices, especially before the election.
It is worth noting that Governor Brian Kemp of Georgia announced on the 12th local time that the state has entered a state of emergency due to high inflation, as the federal government's policies have made residents of the state feel the worst inflation and economic situation in 40 years. Kemp stated that everything the federal government does, from runaway federal spending to policies that hinder domestic energy production in the United States, is taking more money from the middle class.
Analysts believe that the month on month increase in core CPI may require European and American countries to maintain high interest rates for a longer period of time, and the re acceleration of core CPI may force the Federal Reserve to further push up interest rates.
In addition, a big news suddenly came from the US political scene. On September 12th local time, the Speaker of the US House of Representatives and Republican, McCarthy, announced that he had instructed the relevant committees of the House of Representatives to launch a formal impeachment investigation into US President Biden to determine whether Biden had improperly participated in family business transactions. In response, the White House spokesperson stated that the impeachment investigation marked the worst side of extreme politics.
Inflation in the United States has exploded
At 20:30 Beijing time on September 13th, the US Bureau of Labor Statistics released its August CPI report, which showed that the year-on-year growth rate of the US CPI in August rebounded from 3.2% in July to 3.7%, marking the second consecutive month of year-on-year growth rebound, exceeding expectations of 3.6%.
The month on month CPI growth rate in August also accelerated from 0.2% in July to 0.6%, in line with expectations and setting the largest increase in 14 months. Among them, gasoline prices rose by 10.5% month on month, becoming an important driver.
The report shows that the core CPI in the United States, excluding food and energy costs, increased by 4.3% year-on-year in August, with an estimated 4.3%, compared to the previous value of 4.7%; The core CPI of the United States rose 0.3% month on month in August, estimated to be 0.2%, marking the first accelerated increase in six months.
Analysts believe that the month on month increase in core CPI is likely to require European and American countries to maintain high interest rates for a longer period of time, and there is still a possibility of the Federal Reserve raising interest rates in the fourth quarter of this year. At the same time, the re acceleration of core CPI may force the Federal Reserve to further push up interest rates.
The inflation indicator closely monitored by the Federal Reserve - excluding housing, core service sector inflation rose by 0.53% month on month, higher than July's 0.2% and the highest level since September 2022, while remaining above 4% year-on-year.
In terms of sub item data, food prices in the United States increased by 0.2% month on month and 4.3% year-on-year in August; Energy prices increased by 5.6% month on month and decreased by 3.6% year-on-year. The US Bureau of Labor Statistics stated that gasoline and housing prices were the main reasons for the month on month increase in inflation.
It is obvious that the main culprit driving the sudden rise in US CPI in August was oil prices.
Factors such as OPEC+production reduction have led to a continuous tightening of supply and demand relations. Global crude oil prices have rebounded significantly since July, and the international benchmark Brent crude oil has risen by about 20%.
According to the American Automobile Association, the average selling price of regular gasoline at gas stations in the United States reached its highest seasonal level in over a decade in August, and the increase in diesel prices is expected to double that of crude oil prices.
The trigger for the sudden surge in international oil prices was Saudi Arabia and Russia extending the voluntary production reduction period until the end of December this year. Among them, Saudi Arabia voluntarily reduced production by 1 million barrels per day, while Russia voluntarily reduced production by 300000 barrels per day, which prompted oil prices to soar above $90 per barrel for the first time since November 2022.
Goldman Sachs has warned that if OPEC+continues to extend the production reduction agreement, crude oil prices may climb to $107 per barrel in December 2024.
Goldman Sachs believes that another reason OPEC+may not want oil prices to reach $100 is the political importance of US gasoline prices, which means the US President does not want to see gasoline prices soar, especially before the election.
When asked about the reduction in oil supply to Russia and Saudi Arabia, US National Security Advisor Jake Sullivan stated that US President Biden will focus on doing his best to get consumers lower prices at gas stations.
Will the interest rate hike storm continue?
Currently, Federal Reserve officials are repeatedly emphasizing that they are highly concerned about the upward risk of inflation and may need to maintain high interest rates even if interest rate hikes are stopped in the future.
The explosive inflation data has hit again, and the market is worried that the Fed's interest rate hike storm will continue?
Wall Street analysts point out that market expectations believe that tonight's CPI data is unlikely to change the Fed's decision to suspend interest rate hikes next week, but it is likely to change the Fed's decision to raise interest rates in November or December this year.
After the August CPI data was released, the overnight index swap for the December Fed meeting showed that the Fed would tighten by an additional 16 basis points, indicating a 64% chance that the Fed will raise interest rates at its last meeting of the year.
Currently, there are significant differences within the Federal Reserve. The Federal Reserve mentioned in its meeting minutes the risks of policy duality. On the one hand, if policy is relaxed too quickly, it will lead to the risk of inflation rising; On the other hand, excessive tightening of policies will lead to a contraction of the US economy.
In addition, Federal Reserve officials, including Powell, emphasized that the battle is not over yet and warned that the continued strength of the economy may require another rate hike.
Nick Timiraos, a journalist for the Wall Street Journal, known as the "Federal Reserve mouthpiece" and "New Federal Reserve News Agency," pointed out in an article titled "The Interest Rate stance of Federal Reserve officials is undergoing a significant shift" that the latest dot matrix forecast to be released at the end of the September meeting may indicate that additional rate hikes are still being considered, but whether they will eventually be raised is still unknown.
Official announcement: impeachment of Biden
On September 13th, a topic about McCarthy's announcement of the impeachment of Biden and the White House's response surged to the top of the hot search list, sparking heated discussions.
On September 13th, Phoenix TV reported that Republican McCarthy, the Speaker of the United States House of Representatives, announced on the 12th local time that he had instructed relevant House committees to launch a formal impeachment investigation into US President Biden to determine whether Biden was improperly involved in family business transactions.
In recent months, Republicans have been investigating Biden, trying to find out whether he played a key role or benefited from his son Hunter Biden's overseas business dealings.
McCarthy told reporters on Tuesday that House Republicans have discovered serious and credible allegations of President Biden's actions. Overall, these accusations depict a picture of a corrupt culture.
In response to this, the White House spokesperson issued a statement on the same day, stating that Biden was not involved in his son's commercial affairs and did not do anything wrong. White House spokesperson Ian Sams pointed out that the Republican monthly investigation did not find any evidence of misconduct, and the impeachment investigation marked the worst side of extreme politics.
According to US media reports, McCarthy's announcement of an impeachment investigation into Biden is partly aimed at meeting the demands of the far right conservatives in the House Republican Party. Republican conservative Senator Gates stated on the same day that launching an impeachment investigation into Biden is only a small step, and we need to accelerate our actions.
There are also differences among Republicans regarding the impeachment investigation. Some Republicans believe that launching an impeachment investigation into the president without "empirical evidence" is a "bad idea" and may backfire and have a positive impact on Biden.
As a sign of divisions within the Republican Party, McCarthy did not vote for the establishment of an investigation team.
According to a statistic, there have been three presidents impeached by Congress in American history, namely Johnson, Clinton, and Trump.
Reminder from Aihuijun
