US manufacturing report shows inflation rising
The spike in inflation seen in January appears to be more persistent than expected.
When inflation rose sharply in January, many analysts were quick to dismiss it as a seasonal fluke or a temporary adjustment due to higher wages and big increases in Social Security benefits. However, according to recent data, inflationary pressure continued until February.
Supply Management Laboratory Said on that wednesday contract for manufacturing activities In the US, the price index rose 6.8 points to 51.3 for the fourth straight month. Raw material price Instead of declining like the last four months, it’s rising again.
A month before the price index started to rise, the turn toward higher prices actually started.The ISM price index for the past two months has been December 2022Half of the top six manufacturers reported price increases in February.They are Petroleum and Coal Products, Computers and Electronics, Machinery.
The resurgence of inflation is due to the Fed’s decision to slow its pace of rate hikes.
Half a point rate hike is back on the table
Minneapolis Fed President Neil Kashkari On Wednesday, he said he was “open-minded” about whether the central bank should raise interest rates by half a percentage point. One thing to watch out for, Kashkari said, is the dot plot.
“I’m open-minded about whether it’s 25 basis points or 50 basis points,” Kashkari said. Said During a Q&A session at the Sioux Falls Business CEO event. “What’s more important is what the dot plot shows.”
Minneapolis Federal Reserve Governor Neil Kashkari speaks at the Yahoo Finance All Markets Summit in New York on October 10, 2019. (Evan Agostini/Invision/AP)
of FedWatch for CME Group Fed funds futures prices now suggest a 29% chance of a 50 basis point gain when the next Federal Open Market Committee (FOMC) meeting ends on March 22, according to a tool. increase. This is up from zero a month ago.
Kashkari also tipped his dot plot hand, revealing he was one of seven FOMC officials who predicted the center of the Fed’s target range would rise above 5.25% this year.Kashkari said he wrote in pencil 5.4 percent, he was one of five who were between 5.25% and 5.5%. Two officers were higher and 12 were lower.
For the record, Kashkari said he hasn’t decided where to put the dot at the next meeting.But if he had a 5.4 when inflation was declining in December, he more likely now It looks like it’s going up again.
Kashkari told South Dakotans, “Given last month’s data, higher-than-expected inflation and strong job numbers suggest that we’re not progressing as quickly as we’d like. It’s a thing,’ he said.
Bostic also looks like a half point hike
Not just Kashkari.In a comment posted on the website of the Federal Reserve Bank of Atlanta, the Fed President Rafael Bostic He disputed the idea of the Fed cutting rates later this year, saying the Fed’s target should be at least half a percentage point higher.
“So now we have to determine when inflation has fallen irrevocably. We are not there yet. 5 to 5.25% If left untouched until 2024, the tightening policy will percolate through the economy, eventually improving the balance between aggregate supply and aggregate demand and lowering inflation. ” I have written.
where’s the beef?
If you allow subscription beef magazine Expired, you may have missed the news U.S. beef cattle herd at lowest level since 1962 It fell 3.6% last month. In its biannual cattle report, the USDA reported that the number of cattle raised exclusively for beef was 28.9 million, the lowest total number the agency has recorded since 1962.
Farmers will tell you that this means more inflation in beef prices.
Cows graze on a dairy farm at the University of Vermont in Burlington, Vermont, July 23, 2020. (AP Photo/Lisa Rathke)
“As long as cattle stocks are historically low today, that could lead to tighter cattle production, which could lead to higher beef prices,” said James Mitchell of the University of Kentucky. beef“From a cattle producer’s perspective, this also means higher prices. A recent report from the USDA reinforces our bullish outlook for cattle prices over the next few years.”
