Highlights & concerns from FED official members after PPI
Yesterday, a hawkish Federal Reserve official made comments which sparked market speculation. The PPI report showing a year-over-year increase of 6% has reignited inflation expectations, with the wholesale cost index up 0.7% and service prices rising by 0.4%, driving the largest increase in overall data since June of last year.
Cleveland Fed President Mester spoke yesterday, indicating that although there is no new news on the economy, the situation remains strong. However, the uncertain future resulting from the Russian-Ukraine conflict and the Chinese opening up means that if inflation remains high, the next rate hike will be supported by 0.5%. Similarly, St. Louis Fed President Bullard expressed the same view in the early hours of this morning, believing that tightening should be maintained in 2023 to control inflation. Despite not having voting rights this year, both presidents have a significant presence.
With recent strong data, the 2-year bond yield has rebounded for six consecutive days, the longest since September of last year. US bonds and the US dollar continue to rebound, and US stocks have been rising continuously every day.
From my point of view, it seems that the recent strong economic data and inflation concerns have caught the attention of the hawkish officials in the Federal Reserve. The PPI figures released yesterday have reignited the flame of inflation expectations, with the wholesale cost index rising 0.7% month-on-month and service prices and commodity prices both rising sharply since last June.
Even though Fed officials like Mester and Bullard have repeatedly mentioned that the current economic condition is still strong, they are also cautious about the uncertainty brought by the Russia-Ukraine conflict and China's opening up. They have also indicated that if inflation remains high, they would support a 0.5% rate hike at the next meeting to control the inflation.
Meanwhile, the market has been reacting to these statements, with the 2-year Treasury yield bouncing back for six consecutive days since September last year, and the US dollar and US stocks continuing to rise. As for me, I believe that we should not be complacent even if the stock market seems to be doing well, as the hawkish sentiment in the Fed and the ongoing inflation concerns may lead to increased volatility in the future.
@Daily_Discussion @MillionaireTiger @TigerStars @MaverickTiger @CaptainTiger @VideoLounge
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