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US consumer price growth.

 


Annual consumer price growth slowed to 7.7 per cent, less than the 8 per cent forecast by economists, to hit its lowest level since January. The S&P 500 surged by more than 4 per cent after the data were published. The two-year Treasury yield, particularly sensitive to interest rate expectations, dropped 0.3 percentage points to 4.32 per cent. The lower-than-expected readings ease pressure on the Fed to maintain its aggressive interest rate rises policy to combat inflation.

«The fact the Fed may slow down from here means what could break out is a conversation not just about recession rather than inflation but a conversation about maybe avoiding a recession entirely,» said Jim Paulsen, chief investment strategist at The Leuthold Group, a research firm. Investors in the futures market increased bets that the Fed would lift interest rates by 0.5 percentage points in December, having raised by 0.75 percentage points at its past four meetings. The inflation data, released by the Bureau of Labor Statistics, followed unexpectedly tight midterm elections that left the battle for control of Congress still hanging in the balance. High inflation has dogged Joe Biden’s administration for most of his presidential term, igniting fears of a pronounced economic downturn at some point next year as the Fed steps up its efforts to get price pressures under control.

Most economists expect rates to peak at close to 5 per cent next year, well above the 4.6 per cent projected by most Fed officials as recently as September. Powell has repeatedly warned that the higher interest rates need to rise, the longer they stay at a level constraining economic activity, and the greater the odds of the economy tipping into a recession. Most economists expect a contraction next year, with the jobless rate rising substantially.

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  1. Martha11 November 2022 at 17:11

    Avoiding a recession entirely?! I don't know what to say about this. I think we are already in one although some refuse to acknowledge it. I think it's inescapable in most countries around the world, not just the US.

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