USA: producer inflation rises, the Fed prepares a half-point increase
Bad data from the USA. U.S. producer prices for final demand rose 0.7% month over month in January 2023, the highest reading in seven months and higher than market expectations of 0.4%. Asset prices jumped 1.2%, the largest increase since 2.1% in June 2022, led by a 6.2% surge in the cost of gasoline. Domestic natural gas, diesel, jet fuel, soft drinks and motor vehicle indices also rose. Conversely, the prices of fresh and dried vegetables decreased by 33.5%. The indices of residual fuels and basic organic chemicals also declined. Meanwhile, service costs increased by 0.4%, especially for hospital outpatient care (1.4%). Indices for automobile and auto parts retailing, health care, beauty and eyewear retailing, portfolio management, chemical and allied wholesale, and air transportation services are also increased. The margins of the retail trade of fuels and lubricants, on the other hand, fell by 17.5%.
The FED could not remain silent in this situation. Cleveland Fed Chair Loretta Mester salted market wounds after the data, saying she saw a compelling case for another 50 basis point hike earlier this month and that the US central bank must be ready to move interest rates higher if inflation remains stubbornly high.
“Right now, incoming data hasn't changed my view that we need to get the fed funds rate above 5% and hold it for some time,” Mester said in prepared remarks for an event Thursday. organized by the Global Interdependence Center and the University of South Florida Sarasota-Manatee.
“Indeed, at our meeting two weeks ago, putting financial market participants' expectations aside, I saw a compelling economic case for a 50 basis point hike, which would take the top of the target range to 5 %".
So we are facing another probable FED tightening on interest rates, in a situation where the housing market is already showing signs of crisis.
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The article USA: producer inflation rises, the FED prepares a half-point increase comes from Scenari Economics .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/usa-linflazione-alla-produzione-cresce-la-fed-prepara-un-colpo-daumento-da-mezzo-punto/ on Thu, 16 Feb 2023 15:33:09 +0000.