US consumer prices overshoot estimates once again
US consumer prices have revealed an unsettling truth for Washington: the Treasury's policies are not working.
US consumer prices saw a 0.4% hike in September, rising four times faster than in August and twice as much as experts had predicted, US Labor Department data showed, which suggests that the United States will see an uptick in the Federal Reserve's combat of inflation, meaning interest rates are likely to increase yet again.
The Consumer Price Index, or CPI, was expected to increase by a mere 0.2% last month as opposed to 0.1% in August, according to economists surveyed by US media.
The Labor Department, however, said the CPI saw a minor contraction in the year to September, rising by 8.2% as opposed to an 8.3% rise in the year to August.
The Labor Department said for the year though, the CPI contracted modestly in the 12 months to September, growing by 8.2% from an 8.3% expansion in the year to August.
The Fed has been struggling as inflation had it in the corner for over a year now as the annual CPI rate loitering around the 4-decade peak of 9.1% in June.
At the start of 2020, the outstanding US debt had increased by over $8 trillion. And then in 8 months, it had increased yet another $1 trillion.
US national outstanding debt exceeded $31 trillion for the first time in its history according to the US Treasury. This comes at a time when the US is faced with all-time high inflation coupled with high-interest rates, all of which deepen the economic uncertainty problem that the government, businesses, and people are all facing.
The Committee for a Responsible Fiscal Budget (CRFB) forecasted last month that President Joe Biden's policies might raise deficits by $4.8 trillion between 2021 and 2031.
The economic situation which is affecting the financial standpoints of American families and businesses is burdening Biden's popularity, which will affect his chances of winning the midterm congressional elections which will take place in early November.
The US central bank hiked interest rates by 300 basis points in the past seven months to try and cool flaming hot inflation, and it is expected to add an additional 125 basis points before 2023.
The latest CPI data could see the Treasury pushing for an interest rate increase of 100 basis points instead of the 75 the Fed was aiming to add in November, some economists have said.
“The market is now pricing in a 13% chance of 100 bps [hike] on Nov 2,” economist Adam Button said in a comment posted on the Forex Live forum.
The International Monetary Fund warned in late July that given the numerous risks the United States is facing, the country only has a meager chance of averting an economic slump.
"It's a very narrow path," IMF chief economist Pierre-Olivier Gourinchas said. "The current environment suggests that the likelihood that the US economy can avoid a recession is actually quite narrow."
Wall Street’s S&P500 index for the top 500 US stocks was poised to tumble for a seventh day in a row at Thursday’s open.
Energy prices have risen 34.6% over the past year, the fastest since September 2005, food prices have increased 10.1%, and the cost of fuel oil increased by more than two-fold, soaring 106.7% - the largest increase in the history of the consumer price index. A gallon of gas across the US reached $5 nationwide for the first time in history, setting a new record for oil prices.
US mortgage rates, meanwhile, saw a hike that culminated in them sitting comfortably at 6.7% two weeks ago, their highest levels in 15 years.