On 11/9, the US Department of Labor released a report indicating that the country's consumer price index (CPI) increased by 3,4% in August compared to the same period last year, aligning with economists' forecasts.
Excluding volatile food and energy prices, core CPI rose 0,3% from the previous month, marking its strongest increase since April. Year-over-year, this figure climbed 2,4%.
Following the report's publication, the probability of the Federal Reserve (Fed) raising rates at its upcoming meeting significantly increased. CME's FedWatch Tool now shows investors predicting a 91% chance of the Fed taking action next week, up from 72% on 10/9. The Fed has maintained its benchmark interest rate at 3,5-3,75% since the beginning of the year.
Most economists anticipate that persistent inflation data, combined with a robust labor market in August, will prompt the Fed to not only implement a rate hike next week but potentially another in October or December.
Experts suggest that a prolonged Middle East conflict could trigger an energy shock, impacting the broader economy. Furthermore, the global artificial intelligence (AI) boom is contributing to inflationary pressures. This week, international crude oil prices exceeded 100 USD per barrel, reaching a four-month high. US diesel prices also set a new record, surpassing 6 USD per gallon.
Compared to July, gasoline prices in August saw a 3,9% increase, accounting for over one-third of the overall CPI rise. Other fuel types, including diesel, surged 9,6%. Annually, this category increased by 44%. Prices for food, airfares, tuition, rent, and hotel rooms also experienced upward trends.
Currently, inflation has outpaced wage growth. In August, average hourly earnings, adjusted for inflation, decreased 0,3% compared to the same period last year.
"Inflation driven by energy prices does not stop at gas stations. It will travel by truck, plane, and cargo ship into every store in the US. The likelihood of the Fed raising interest rates is very high. They cannot allow an energy shock to become an everything shock", stated Sung Won Sohn, a professor of finance at Loyola Marymount University.
Last month, Fed Chairman Kevin Warsh declared that the agency "still has much work to do" if it is not confident that inflation will fall to its 2% target. Conversely, US President Donald Trump last week continued to urge the Fed to lower interest rates, threatening to "stop trading with countries it has a trade deficit with" otherwise.
Ha Thu (according to Reuters)
