10 March 2022
If you are covering the latest US inflation figures, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Any hopes that inflation may have been starting to reach its peak in the US have been well and truly dashed. The latest CPI data shows inflation climbed once again in February, hitting 7.9% - the largest increase in 40 years.
“Given this data captures the period before Russia’s invasion of Ukraine, inflation won’t be stopping there. In response to the attack, the US and other nations declared financial sanctions on Russia, and Biden this week banned imports of Russian gas and oil. The impact has reverberated through markets, with the prices of gas and oil and other commodities soaring.
“Peak inflation had been expected to come later this year, but this will likely now be both considerably higher than first anticipated – with some suggesting it could hit 10% - as well as delayed until early next year.
“With the jobs market surging, and inflation now hitting lofty heights, a rate hike at the Fed’s meeting next week looks like a certainty.
“While raising interest rates will do little to dampen high energy costs, at least in the short term the Fed may be able to take some comfort from consumers who appear ready to accept the burden of higher prices given the extreme hardship being inflicted on Ukrainians, as opposed to immediately demanding higher wages as they may have done under different circumstances. This could potentially prove dis-inflationary as consumers will have less to spend on discretionary purchases as a result.”
