U.S. inflation may continue to soar in January, putting pressure on the Fed to raise interest rates

JRFX
4 min readFeb 7, 2022

U.S. non-farm employment has withstood the test of the epidemic and has grown significantly, and wage data may intensify the pressure on interest rate hikes:

Despite a record surge in Covid-19 infections in January and some business closures, U.S. employers continued to hire on a hiring spree and a sharp rise in wages also put further pressure on the Federal Reserve to raise interest rates. Nonfarm payrolls rose by 467,000 in January from an upwardly revised 510,000 increase in December, the Labor Department data showed on Friday. The unemployment rate edged up to 4% and average hourly earnings jumped.

U.S. inflation may continue to soar in January, putting pressure on the Fed to raise interest rates:

Economic data is expected to show U.S. inflation pressures continued to build at the start of the year, potentially prompting the Federal Reserve to raise interest rates next month. According to economists surveyed by Bloomberg, the U.S. consumer price index (CPI) may have risen by 7.3% in January from a year earlier, the largest year-on-year increase since early 1982. The CPI, which excludes volatile energy and food, is expected to rise 5.9%.

Summers said the Fed could raise rates seven times this year, possibly by more than 25 basis points at a time:

Former U.S. Treasury Secretary Lawrence Summers said investors need to prepare for the possibility of the Fed raising rates at all of its remaining seven meetings this year, or even more than 25 basis points in one go. “The market has to prepare for the possibility of a rate hike at every meeting, the possibility of a one-time rate hike of more than 25 basis points due to inflation,” Summers told Bloomberg Television’s “Wall Street Week” on Friday. Speaking to David Westin on the show. Summers, now a professor at Harvard University and a paid contributor to Bloomberg, said the Fed was “too late” and that those who didn’t believe the Fed could raise rates in a row during the year were “underestimating the range of possibilities.” Bank of America forecasts that the Fed will raise interest rates at the rest of its policy meeting this year, the highest forecast among major Wall Street banks. Nomura drew attention last week when it predicted the Fed would raise interest rates by 50 basis points for the first time since 2000.

Global negative-yielding bonds have shrunk rapidly, shrinking $1.5 trillion in one day:

The world’s vast stock of negative-yielding bonds has shrunk by a record one-fifth in just one day, suggesting the era of negative-yielding bonds may be over if forecasts of normalizing monetary policy come true . In Germany and Japan, two of the world’s major negative-yielding bond countries, five-year bond yields turned positive for the first time in years on Friday. In the U.S., the real yield on the 30-year Treasury note rose to zero for the first time in eight months after stronger-than-expected nonfarm payrolls data for January. The global pool of negative-yielding bonds shrank to $6.1 trillion, the lowest level in three years.

Chief Economist of the Bank of England: The benchmark interest rate may rise again in the coming months:

Bank of England chief economist Huw Pill said the UK benchmark lending rate is likely to rise again in the coming months, and it is likely that living standards will inevitably take a hit. In an interview with Bloomberg TV, Pill said the central bank was working to ensure Britain did not experience a second-round effect of so-called high inflation. A day earlier, the Bank of England raised interest rates for the second time in a row, raising rates to 0.5%. “As long as the situation is broadly in line with our expectations, we expect further moderate tightening of monetary policy, including raising bank rates,” Pill said in an interview with Bloomberg Television on Friday. “Given the nature of the shock we are facing, there will be a hit to UK real incomes to some extent. It is inevitable.”

China Development and Reform Commission: It is expected that the CPI will rise moderately in 2022, and the PPI increase may gradually fall:

China’s National Development and Reform Commission’s WeChat official account published a Sunday article saying that in 2022, China’s prices will maintain a solid foundation. The trend is more coordinated. The article said that the impact of the exogenous epidemic in 2022 may gradually weaken, and the price movement is expected to depend more on endogenous factors in the economy.

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