In a well-telegraphed move that markets had been expecting for weeks, the central bank raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.

The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high.

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Source: https://www.cnbc.com/2022/11/02/fed-hikes-by-another-three-quarters-of-a-point-taking-rates-to-the-highest-level-since-january-2008.html

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The post Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead first appeared on Garner Ted Armstrong Evangelistic Association.

The ECB’s three key interest rates were each raised by 75 basis points.

“This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target,” the bank’s Governing Body said in a statement.

It also flagged to markets that “over the next several meetings the Governing Council expects to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.”

The move sees the ECB follow in the policy footstep of the US Federal Reserve which carried out two jumbo rate hikes of 0.75 points in June and July.

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Source: https://www.euronews.com/my-europe/2022/09/08/european-central-bank-announces-largest-interest-rate-hike-in-bid-to-fight-inflation

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Inflation surged more than expected in January, notching another four-decade high as strong consumer demand and pandemic-related supply-chain snarls fueled rapid price gains that wiped out the benefits of rising wages for most Americans.

The consumer price index rose 7.5% in January from a year ago, according to a new Labor Department report released Thursday, marking the fastest increase since February 1982, when inflation hit 7.6%. The CPI – which measures a bevy of goods ranging from gasoline and health care to groceries and rents – jumped 0.6% in the one-month period from December.

Economists expected the index to show that prices surged 7.3% in January from the previous year and 0.5% on a monthly basis.

So-called core prices, which exclude more volatile measurements of food and energy, climbed 6% in January from the previous year – a sharp increase from December, when it rose 5.5%. It was the steepest 12-month increase since August 1982.

“U.S. annual CPI is the highest since 1982, and what’s worse is that this likely isn’t the peak,” said Seema Shah, chief strategist at Principal Global Investors. “Higher-than-expected monthly gains in core CPI indicate continued underlying heat and will do nothing to relieve pressure on the Fed to tighten sharply and urgently.”

Stocks declined after the report, with tech leading the broad market selloff.

Rising inflation is eating away at strong wage gains that American workers have seen in recent months: Real average hourly earnings rose just 0.1% in January from the previous month, as the 0.6% inflation increase eroded the 0.7% total wage gain, according to the Labor Department. On an annual basis, real earnings actually declined 1.7% in January.

Price increases were widespread: Although energy prices rose just 0.9% in January from the previous month, they’re still up 27% from last year. Gasoline, on average, costs 40% than it did last year. Food prices have also climbed 7% higher over the year, while used car and truck prices – a major component of the inflation increase – are up 40.5%. Shelter costs jumped 0.3% for the month and 4% year-over-year.

The inflation spike has been bad news for President Biden, who has seen his approval rating tumble as consumer prices rise. The White House has blamed the price spike on supply-chain bottlenecks and other pandemic-induced disruptions in the economy, while Republicans have pinned it on the president’s massive spending agenda and his energy policies targeting the oil and gas industries.

The eye-popping reading – which marked the eighth consecutive month the gauge has been above 5% – could also amp up pressure on the Federal Reserve to kick off its interest rate increases next month with a half-basis point hike. Raising interest rates tends to create higher rates on consumers and business loans, which slows the economy by forcing them to cut back on spending.

Traders are now pricing in over a 44% chance of a hefty half-point rate jump when policymakers meet next month, instead of a more modest quarter-point increase. It would mark the first time since 2000 that the U.S. central bank raised the federal fund rate by 50 basis points. The Fed has not raised rates since December 2018. The odds of a sixth quarter-basis point hike this year, meanwhile, jumped to 63% after the inflation report.

“At this point it’s not a question of will they, won’t they – it’s a question of how many hikes we’ll see in 2022, and what the magnitude and pace will be,” said Mike Loewengart, managing director of investment strategy at E*Trade. “Given views on these aspects are all over the map at this point, there is a lot for the market to be uncertain about.”

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Fed Chairman Jerome Powell has left open the possibility of a rate hike at every meeting this year and has refused to rule out a more aggressive, half-percentage point rate hike, but said it’s important to be “humble and nimble.”

“We’re going to be led by the incoming data and the evolving outlook,” he told reporters during the central bank’s policy-setting meeting last month.

Source: https://www.foxbusiness.com/economy/consumer-price-index-inflation-january-2022?test=38861ea43380e1402f1c90f21546ad4b

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Stocks sank in morning trading on Wall Street Monday, putting the benchmark S&P 500 on track for what the market considers a correction — a drop of 10% or more from its most recent high.

The S&P 500 fell 2.5% to 4,287.22 as of 10:15 a.m. ET, and is now down about 10.7% from the high it set on Jan. 4. A close of 4,316.90 or lower will put it into a correction.

The declines in the market extend a recent run of losses that have left major indexes in a January slump. The Dow Jones Industrial Average fell 712 points, or 2.1%, to 33,544 and the Nasdaq fell 3%.

Investors have been growing increasingly worried about how aggressively the Federal Reserve, which holds a policy meeting this week, might act to cool rising inflation. Wall Street anticipates the first increase in interest rates as early as March, and investors have grown increasingly concerned the Fed will have to raise rates more quickly and more often than the central bank originally indicated.

The Fed’s benchmark short-term interest rate is currently in a range of 0% to 0.25%. Investors now see a nearly 70% chance that the Fed will raise the rate by at least one percentage point by the end of the year, according to CME Group’s Fed Watch tool.

Inflation is putting pressure on businesses and consumers as demand for goods continues to outpace supplies. Companies have been warning that supply chain problems and rising raw materials costs could crimp their finances. Retailers, food producers and others have been raising prices on goods to try to offset the impact.

Wall Street also has several key economic reports to look forward to this week. Investors will get more data on how consumers feel with the release on Tuesday of The Conference Board’s Consumer Confidence Index for January. The Commerce Department releases its report on fourth-quarter gross domestic product on Thursday and its report on personal income and spending for December on Friday.

Additional reporting by The Associated Press.

Source: https://www.newsy.com/stories/stock-market-tumbles-as-fed-eyes-interest-rate-hikes/

The post Stocks Tumble As Federal Reserve Eyes Interest Rate Hikes first appeared on Garner Ted Armstrong Evangelistic Association.

U.S. job growth significantly undershot expectations in November, suggesting that difficulty in attracting new workers is weighing on the labor market’s recovery from the pandemic, even as COVID-19 cases dissipated nationwide.

The Labor Department said in its monthly payroll report released Friday that payrolls in November rose by just 210,000, well below the 550,000 jobs forecast by Refinitiv economists. It marked the worst month for job creation so far this year. The unemployment rate (which is calculated based on a separate survey) dropped more than expected to 4.2% from 4.6% — the lowest level since the pandemic began.

The labor market had been gaining momentum after a delta-induced slowdown over the summer, but the latest figure represents a significant drop from October’s upwardly revised number of 546,000 and September’s upwardly revised 379,000. There are still about 3.9 million fewer jobs than there were last February, before the crisis began.

“Today’s employment report is doubly disappointing, because the reference week occurred just as it looked like Covid was on the retreat,” said Justin Wolfers, a University of Michigan economist. “This was a moment for people to return to malls and to return to work. The COVID-related news has only gotten worse since then.”

The report wasn’t all bad news, however: The labor force participation rate rose to 61.8%, wages rose 4.8% from a year ago and the survey of households offered a brighter outlook, pointing to an employment gain of 1.13 million for the month. (The jobs report consists of two surveys – one based on employers and the other on households).

RSM chief economist Joe Brusuelas described the report as a “tale of two surveys.”

“Rarely has the estimate produced by the good folks at the Bureau of Labor Statistics resulted in such divergent results as that illustrated by the twin establishment and household surveys that are the foundation of the monthly tally,” Brusuelas said.

The job growth stumble comes before the emergence of the newly identified omicron variant of COVID-19, which could jeopardize the global economy’s recovery. There is still a lack of clarity over how dangerous the new variant is, including whether it is more transmissible or capable of causing more severe illness. Early evidence suggests an increased risk of reinfection.

Public health officials have urged caution against panic.

But the economic impacts of the new strain – which has been found in at least 38 countries including the U.S. – have already been felt, with the U.S. and at least 10 European nations suspending air travel from southern Africa. The 27-nation European Union also recommended an “emergency brake” on travel from southern Africa, citing the “very concerning” new variant.

Surveys for the November jobs report were conducted about three weeks ago, before the new variant was detected.

Leisure and hospitality, one of the hardest-hit sectors that has become a bellwether of sorts for the economy’s recovery, saw a gain of just 23,000 new jobs last month. By comparison, it added 170,000 new jobs in October. The sector, which includes bars, restaurants and hotels, has recovered about 7 million of the jobs it lost during the pandemic, but remains about 1.3 million below its February 2020 level.

A mixed bag of industries accounted for growth last month. Substantial gains took place in professional and business services (90,000), transportation and warehousing (50,000), and construction (31,000). But retail employment fell by 20,000 last month on a seasonally adjusted basis, despite the upcoming holiday season.

Markets remained relatively calm, despite the disappointing report.

Federal Reserve policymakers have been closely watching the labor market for signs that employment is reaching pre-crisis levels after the pandemic triggered one of the steepest – but shortest – recessions in nearly a century.

Although the jobs figure came in well below economists’ expectations, the U.S. central bank may plow ahead with tentative plans to begin more aggressively unwinding the economic support put in place in March 2020 in order to curtail surging inflation.

“If you think this report will push back the accelerated taper mentioned by Fed Chairman Jerome Powell this week, you would be mistaken,” said Jamie Cox, managing partner for Harris Financial Group.

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The central bank has been purchasing $120 billion in bonds each month throughout most of the pandemic in order to keep credit cheap and stabilize the financial markets. In November, Fed officials announced plans to scale back the program by $15 billion a month, a timeline that would end the program by late June.

Chairman Jerome Powell suggested this week that Fed officials may accelerate their plan to reduce their monthly purchases of bonds and mortgage-backed securities later this month.

“At this point, the economy is very strong, and inflationary pressures are high,” Powell said on Tuesday. “It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner.”

Source: https://www.foxbusiness.com/economy/november-jobs-report-coronavirus-pandemic?test=38861ea43380e1402f1c90f21546ad4b

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The Consumer Price Index, which tracks the prices of everything from cars to clothing, jumped 0.8% in April, the Labor Department said Wednesday. Over the past 12 months, prices have increased 4.2% — the fastest rise since September 2008.

Used car prices led the surge, with a record 10% increase. But the gains were broad-based. Core inflation, which excludes volatile food and energy, jumped 3% over the past year.

“Almost all the gain was driven by outsized increases in sectors that are seeing demand surge as restrictions ease,” Michael Pearce, chief U.S. economist at Capital Economics, said in a research note. “The rise in airfares and hotel prices is so far simply reversing the sharp declines in prices seen earlier in the pandemic. But car rental prices have surged well above pre-pandemic levels, reflecting limited supply.”

With more consumers dining out and traveling this summer, pent-up demand could drive up prices in other leisure categories, Pearce noted.

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Several goods-producing sectors saw price increases, led by used vehicles, whose “staggering” 21% annual increase is largely due to the fallout from semiconductor shortages, noted Barclays. As supply-chain issues slow the production of new cars, impatient auto shoppers are turning to used vehicles, driving up their costs. Prices also rose 0.3% for clothing, 0.5% for new cars and 0.6% for medical care.

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The biblical prophets chastised the people for having eyes but not seeing and for having ears but not hearing. When it comes to inflation, the Federal Reserve might be chastised in the same way. Despite the many anecdotes suggesting that inflation is on the rise, the Fed does not seem to listen. Similarly, despite the many clues in plain sight now pointing to a marked acceleration in inflation later this year, the Fed seems to be turning a blind eye.

The Fed is certainly not listening to Warren Buffet. At a recent Berkshire Hathaway meeting, Buffet warned his investors that his company was seeing a red-hot economy and substantial inflationary pressure. While noting that everybody now seemed to be raising prices, he drew particular attention to the rapid price increases for steel, lumber, and other building materials.

Buffet also might have noted that the automobile and appliance companies are now experiencing significant supply chain problems especially in regard to computer chips and that companies across the board are finding it difficult to hire skilled workers.

It seems that the Fed is also not listening to the markets, which have now significantly raised their inflation expectations. Indeed, according to the Saint Louis Federal Reserve, the 10-year breakeven inflation rate has now risen to more than 2.4 percent. This is its highest level in the past decade, and it is also significantly above the Fed’s inflation target. So much for the Fed’s belief that inflation expectations are still well anchored.

Closer to home, the Fed is paying little regard to the domestic money supply explosion to which its ultra-easy monetary policy has given rise. As a result of the Fed’s aggressive bond-buying program, the broad money supply is now growing by around 30 percent or by far its most rapid rate in the past 60 years. If Milton Friedman was right in his assertion that inflation is always and everywhere a monetary phenomenon, the currently very rapid rate of money supply growth should be raising red inflationary flags at the Fed.

More important yet, the Fed seems to be ignoring the extremely expansionary nature of President Biden’s budget policy. At a time that the Congressional Budget Office is estimating that the U.S. economy is currently operating at only 3 percent below its full-employment potential, Biden’s COVID-19 rescue plan would imply that this year the U.S. economy will receive budget stimulus amounting to as much as 13 percent of GDP.

Adding to the risk that such a large amount of fiscal stimulus could soon lead to substantial economic overheating is the fact that it is occurring as the Federal Reserve has its pedal to the metal. Not only is the Fed keeping interest rates at close to their zero bound, but the Fed continues to buy $120 billion a month of U.S. Treasury bonds and mortgage-backed securities.

Biden’s massive budget stimulus is also occurring at a time that the economy is already recovering strongly and at a time that a large amount of COVID-related pent-up demand in the economy is likely to be released once most of the public is vaccinated. This must further heighten the risk of significant economic overheating and rising inflation by yearend.

Ignoring the painful inflationary experience of the 1970s, the Fed keeps affirming its intention to only start removing its proverbial monetary punchbowl when it sees that actual inflation is exceeding its inflation target. By so doing, it ignores the fact that monetary policy generally operates with long and variable lags. By waiting for actual inflation to exceed its target, the Fed runs the all too real risk of falling behind the inflation curve.

The Fed’s tardiness in responding to mounting inflationary evidence is to be regretted since we know that the main victims of higher inflation are the economically most vulnerable members of society. It is also to be regretted since it heightens the chances that we will have a hard economic landing when the Fed eventually has to slam on the monetary policy brakes.

Desmond Lachman is a resident fellow at the American Enterprise Institute. He was formerly a deputy director in the International Monetary Fund’s Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.

Source: https://thehill.com/opinion/finance/551727-inflation-stalks-the-us-economy

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“We’re doing well, but it’s an unforeseen problem,” the president said as he signed the legislation in the White House’s Diplomatic Reception Room. He made the comments before departing for Tennessee to tour damage from tornadoes that struck the state earlier this week.

Trump also said he did not think Americans were too worried about the potential effects of the coronavirus.

“I don’t think they’re panicking,” Trump said at the bill signing. “It’ll go away.”

Earlier, the White House said the president had canceled a planned trip Friday to the Centers for Disease Control and Prevention (CDC) in Atlanta, with the White House saying that the president does not want to interfere with the agency’s work to fight the novel coronavirus.

But speaking to reporters, Trump said he still may go the CDC, saying the visit was canceled because of concerns someone at CDC may have been infected. Tests, though, have since come back negative, he said. By Friday morning, the trip to Atlanta had been added back to the president’s schedule.

“They had one person who was potentially infected … Because of the one person, at a high level,” Trump said.

TRUMP TO SIGN $8.3B CORONAVIRUS FUNDING BILL FRIDAY, PENCE SAYS

Vice President Mike Pence announced Thursday that Trump would sign the $8.3 billion spending bill to fund the fight against the coronavirus on Friday. The legislation passed overwhelmingly in both the House of Representatives and the Senate in a rare show of bipartisanship in a very polarized Congress.

The vice president said the efforts by health officials and lawmakers represented the “very best of D.C. coming together, putting the health and wellbeing of the American people first and making nearly $8 billion available not only to federal agencies but to state and local efforts as we confront coronavirus.”

The bill will fund the development of vaccines, medications to treat the disease and diagnostic tests all while helping state and local governments — and foreign governments — fight the coronavirus, which causes a disease officially known as COVID-19.

Also at the bill signing, Trump addressed a variety of other topics as he spoke with reporters, including stock market fluctuations, the Federal Reserve and Thursday’s exit from the presidential race by Sen. Elizabeth Warren, D-Mass.

“I think financial markets will bounce back,” Trump said as markets were down over 700 points already Friday morning. “They were up 70 percent so it’s a relatively small piece. I don’t like to see it happen because I was looking for 30,000 relatively soon.”

On Warren, Trump said, “I think lack of talent was her problem,” after a reporter asked him if he thought sexism played a role in the failure of Warren’s presidential campaign. “She was a good debater, she destroyed Mike Bloomberg very quickly, like it was nothing… But people don’t like her. She’s a very mean person… People don’t want that. They like a person like me, that’s not mean.”

Trump also slammed the Federal Reserve for not taking actions similar to what other central banks around the world have done.

“We’re going to see whether or not the Fed wants to stimulate. In my opinion they should,” Trump said. “Everybody is but us … I have a Fed that is not exactly proactive, I’m being very nice when I say that.”

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The coronavirus originated in Wuhan, China, before spreading worldwide. It has now infected nearly 100,000 people total with cases on every continent but Antarctica, with 232 cases in the United States. Worldwide, 3,383 people have died from the coronavirus, including 11 in the United States.

Fox News’ Dom Calicchio and Mary Schlageter contributed to this report.

Source: https://www.foxnews.com/politics/trump-cancels-trip-to-cdc-amid-coronavirus-outbreak

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