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Endless Inflation – Two More 75 Basis Point Hikes This Year As Wall Street Shocked By September 8.2% Inflation



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Oct 13 2022
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Senile President Joe Biden still believes the economy is still in good shape and there isn’t any inflation. But the more the U.S. in denial, the longer the inflation rate is plaguing the country. The latest CPI (consumer price index) is out, and it’s horrible. The September inflation is 8.2%, up 0.4% from a year ago. Meaning it is still hovering near the highest levels since the early 1980s.

 

Last month, economists, analysts and investors were caught with their pants down after they bet that the inflation had cooled down. Instead, the August CPI hit 8.3%, after hitting 8.5% in July and 9.1% in June – the he highest inflation in 40 years after January’s 7.5%, February’s 7.9%, March’s 8.5%, April’s 8.3% and May’s 8.6%. For 7 months (March-September), we have inflation above 8%.

 

We had warned in August that the worst is not over yet – the inflation and recession are still alive and the global economy is still in bad shape. Last month, we again published that the American economy was spectacularly screwed because past months of inflation were due to rising cost of energy and global food shortages. But in August, even without the energy and food prices, the inflation shot up.

President Joe Biden Recession - Homes Sales, GDP, Gas Price, Inflation

In the month of August, the core inflation – prices of goods and services “except” food and energy – skyrocketed to 0.6% month over month. It means inflation has spread to other sectors, and not only confined to food and energy. Worse, gas prices had fallen for 13 weeks in a row, without which the inflation would be even worse. But the gas prices have since gone up again.

 

In the month of September, the core consumer price index accelerated to 0.6% against the Wall Street estimate of a 0.4% increase (only increase 0.1% in August). And excluding food and energy prices, the core inflation was up 6.6% from a year ago – the biggest 12-month gain since August 1982. The energy index increased 19.8% for the 12 months ending September.

 

While the gasoline index fell 4.9% in September following a 10.6% decrease in August, the index for natural gas increased to 2.9% after increasing 3.5% in August. Hence, the electricity index also increased over the month to 0.4%. Over the past 12 months, the gasoline index increased 18.2 %, fuel oil (up 58.1%), electricity (up 15.5%) and natural gas (up 33.1%).

US Inflation - August 2022 - 8.3 Percent

The food index, meanwhile, rose 0.8% in September, the same as August, and was up 11.2% from a year ago. The increase helped offset a 2.1% decline in energy prices that included a 4.9% drop in gasoline. But the problem will continue because energy prices have moved higher in October, which means the October inflation could be worse than September.

 

All six major grocery store food group indexes increased, including fruits and vegetables (up 1.6%), cereals and bakery products (up 0.9%), meats, poultry, fish, and eggs (up 0.4%), nonalcoholic beverages (up 0.6%), dairy and related products (up 0.3%) and other food at home (up 0.5%). The food at employee sites and schools index rose 44.9% – reflecting the expiration of some free school lunch programs.

 

Crucially, shelter costs, which make up about one-third of the CPI, jumped 0.7% (the same as August) and are up 6.6% from a year ago. Transportation services also showed a big jump, increasing 1.9% compared to 0.5% in August, skyrocketing to 14.6% on an annual basis. Medical care costs rose 1% in September compared to 0.8% in August – the highest monthly increase.

Federal Reserve - Building

Since March, the U.S. central bank has raised benchmark interest rates 3 full percentage points. The horrible September inflation number means the Federal Reserve will almost certainly raise a fourth consecutive 0.75 percentage point hike when it next meets on November 1. In fact, analysts think there is a 62% probability of a fifth straight hike of 75 basis point hike.

 

This means the Fed might raise 0.75% interest rate in November and December. The most disturbing fact is that inflation is rising despite aggressive Federal Reserve effort to tame the price increases. Therefore, a 100 basis point hike is possible. In August, Fed chairman Jerome Powell  said the central bank would use its tools “forcefully” to bring prices down, warning that there would be “pain ahead”.

 

The stubborn high inflation is a headache for the clueless Biden administration as the Democrats are still struggling to limit their losses in the upcoming midterm elections in Nov 8. To make matters worse, Biden’s trip to Saudi Arabia in July to beg for more oil has seen the opposite effect. Saudi-led OPEC+ has decided to slash oil production by 2 million barrels per day instead.

Senile Joe Biden - Inflation

Inflation has lingered for more than a year and a half and the central bank has raised interest rates 5 times this year. Yet, President Biden, still in denial, said he saw signs of progress in the inflation report. Defending his economic mismanagement, he argued that inflation continued to be a global problem that was not just affecting the United States.

 

Did the POTUS realize that it was the U.S. under his leadership that is causing the global inflation? The September inflation has shocked the Wall Street. Chris Antsey of Bloomberg said – “For Democrats, this is a disaster. Today’s is the final CPI report ahead of the November 8 midterm election. You can bet that Republicans will be hitting this hard – worst inflation in four decades.”

 

Andrew Banner of NatAlliance Securities said – “Horrible CPI number … what will the Fed do about interest rates: Will they go 100 basis?” Jim Caron of Morgan Stanley said – “It is brutal. I do think that prices will start to moderate – I thought that this would already be happening at this point. The issue now is that inflation has moved from the goods sector and has permeated into the services sector.”

US Inflation - Supermarket

Steve Chiavarone of Federated Hermes said – “This report raises the risk that we may see a new cycle high in headline inflation before the end of the year. With energy prices moving back up, a mid-90s oil price in December could see us surpass the 9.1% headline peak from June. Looking at the components, what is most worrying is the big jump in services. This is where both shelter prices and wages reign supreme.”

 

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