Inflation in the US beats another record. On June 10, the retail trade index surpassed the already ominous analysts’ estimates, “rising” by 8.6% in May.
Analysts had expected the index to rise to 8.3%. In the end, the announced news turned out to be much worse: inflation rose to 8.6%, the highest for the index since 1981. On a monthly basis, the index jumped 1% from a 0.3% gain in April.
The key moment was the surge in fuel prices, with the price of gasoline in many states exceeding $5 a gallon, and is estimated to reach $6 in the summer. Energy prices rose by 3.9% compared to the previous month, while their overall increase since the beginning of the year amounted to 34.6%. Food prices also rose, adding another 1.2% in May, while their overall increase since the beginning of the year was 10.1%.
Structural inflation, excluding food and energy prices, was 6%, slightly higher than the estimated 5.9%.
Call for the Fed
Literally yesterday Prominent economist Mohamed El-Erian has warned that US inflation has not yet “reached” the ceiling.as the forces driving inflationary pressures expand. In fact, he reiterated his critical views of the Federal Reserve, which erroneously believed last year that high inflation would be temporary.
Since then, the US Federal Reserve has changed its monetary policy, raising interest rates twice, most recently by 50 basis points. However, according to the minutes of its last meeting, board members seem to realize that in the coming months they will need multiple, as well as dynamic interest rate increases. In fact, some of its members have already submitted a proposal for a 75 basis point increase in the fall.
Given these numbers, markets now expect that as the Fed tightens its monetary policy, interest rates will rise from 2.5% to 2.75% by the end of the year.
The negative effects of inflation had a direct impact on stock indices, which was natural in the US market. Before the conference, Dow Jones futures fell to 279 points, or 0.9%, while losses on the S&P 500 and Nasdaq were 1.1% and 1.4%, respectively.
In the bond market, the yield on US 2-year bonds jumped 8 basis points, exceeding 2.9%, and 10-year bonds – at the level of 3.03%.