Economy

Consumer prices rose 0.4% in September and were up 8.2% from a year ago, according to BLS data released Thursday.
Excluding food and energy, the core consumer price index accelerated 0.6% and 6.6% respectively.
Worker wages took another hit, falling 0.1% monthly and 3% year over year when adjusted for inflation.
Markets now expect the Fed could institute consecutive 0.75 percentage point rate hikes in November and December.

Prices consumers pay for a wide variety of goods and services rose more than expected in September as inflation pressures continued to weigh on the U.S. economy.
The consumer price index for the month increased 0.4% for the month, more than the 0.3% Dow Jones estimate, according to the Bureau of Labor Statistics. On a 12-month basis, so-called headline inflation was up 8.2%, off its peak around 9% in June but still hovering near the highest levels since the early 1980s.

Excluding volatile food and energy prices, core CPI accelerated 0.6% against the Dow Jones estimate for a 0.4% increase. Core inflation was up 6.6% from a year ago.
The report rattled financial markets, with stock market futures plunging and Treasury yields moving up.
Another large jump in food prices boosted the headline number. The food index rose 0.8% for the month, the same as August, and was up 11.2% from a year ago.
That increase helped offset a 2.1% decline in energy prices that included a 4.9% drop in gasoline. Energy prices have moved higher in October, with the price of regular gasoline at the pump nearly 20 cents higher than a month ago, according to AAA.
Closely watched shelter costs, which make up about one-third of CPI, rose 0.7% and are up 6.6% from a year ago. Transportation services also showed a big bump, increasing 1.9% on the month and 14.6% on an annual basis. Medical care costs rose 1% in September.

The rising costs meant more bad news for workers, whose average hourly earnings declined 0.1% for the month on an inflation-adjusted basis and are off 3% from a year ago, according to a separate BLS release.
Inflation is rising despite aggressive Federal Reserve efforts to get price increases under control.
The central bank has raised benchmark interest rates 3 full percentage points since March. Thursday’s CPI data likely cements a fourth consecutive 0.75 percentage point hike when the Fed next meets Nov. 1-2, with traders assigning a 98% chance of that move.
The chances of a fifth straight hike three-quarter point hike also are rising, with futures pricing in a 62% probability following the inflation data.

This is breaking news. Please check back here for updates.

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The rate on the November overnight index swap contract rose to 3.86%, more than 75 basis points above the current effective fed funds rate. It previously peaked at 3.813% on Friday after stronger-than-expected September employment data.The market also priced in a higher eventual peak for the policy rate, with the March 2023 contract touching 4.864%.The CPI data was “clearly a shock for the markets and the markets are off because of it,” Seth Carpenter, chief global economist at Morgan Stanley said on Bloomberg television. “There is persistence, particularly in the services side of inflation.”Excluding food and energy, the Consumer Price Index increased 6.6% from a year ago, the highest level since 1982, Labor Department data showed Thursday. From a month earlier, the core CPI climbed 0.6% for a second straight month. The Fed has raised its policy rate five times since March, most recently to a range of 3%-3.25% in September, after dropping the lower bound to 0% two years earlier at the onset of the pandemic.(Adds analyst’s comment, inflation details in fourth and fifth paragraphs, and chart.)©2022 Bloomberg L.P. More

The US consumer price index rose at a pace of 8.2 per cent last month compared to September 2021, in new data likely to cement perceptions that Washington has failed to bring down inflation before November’s midterm elections.According to the Bureau of Labor Statistics, the increase in the CPI last month was little changed from the 8.3 per cent annual rise recorded in August — and will increase pressure on the Federal Reserve to proceed with aggressive monetary tightening. The core CPI measure, which strips out volatile energy and food costs, rose by 6.6 per cent on an annual basis last month, faster than the 6.3 per cent rate in August, a sign that underlying inflationary pressures were still accelerating.Compared to August 2022, the overall CPI rose by 0.4 per cent while the core measure increased by 0.6 per cent.Futures for the S&P 500 swung sharply after the data was released. The index had been set for a 1.3 per cent gain before the CPI announcement; after the data was published, it fell to 1.9 per cent lower than Wednesday’s close. The yield on the two-year US Treasury, which is sensitive to changes in monetary policy expectations, surged 0.15 percentage points higher at 4.43 per cent.The persistence of high inflation has been a huge political headache for the White House and congressional Democrats, overshadowing a swift recovery out of the coronavirus pandemic with millions of jobs created since Joe Biden took office.Senior White House economic officials initially expected the jump in inflation to be shortlived, then scrambled to find ways to ease supply chain disruptions and reduce petrol prices, as the Federal Reserve began to tighten monetary policy. Amid intensifying political pressure, Biden eventually struck a deal with Congress to enact a legislative package called the Inflation Reduction Act, which included measures to reduce the cost of some goods such as prescription drugs, but had little effect on prices in the short term.Meanwhile, Republicans have made rising prices a central part of their message to voters, blaming the Biden administration for the higher costs, and tying the rise in prices to the Democrat-led stimulus enacted by the president in March 2021 that injected $1.9tn into the US economy.On Wednesday, several Republican lawmakers and candidates jumped on new figures showing that the producer price index, a measure of wholesale prices for businesses, rose faster than expected in September.

Rick Scott, the Republican senator from Florida who chairs the National Republican Senatorial Committee, said inflation was an “unbearable kick for families trying to get back on their feet” in his home state in the wake of Hurricane Ian.Mike Crapo, the most senior Republican on the Senate finance committee, said: “American families and businesses continue to be hammered by the runaway inflation generated from reckless spending policies of the Biden administration.”He added: “The current administration took an economy on an impressive rebound from lockdowns, injected trillions of dollars in reckless spending, and American families and future generations will pay the price of economic mismanagement.”US consumers have received some relief from the fall in petrol prices that occurred over the summer: the peak of inflation under Biden so far came in June, when CPI rose by 9.1 per cent on an annual basis. But the administration and Fed officials would have liked to have seen the price increases fade more rapidly than they have. More

BUENOS AIRES (Reuters) – Argentines facing an inflation rate set to top 100% this year are grappling to survive, turning to recycling from garbage dumps or lining up to trade their belongings in barter clubs.The South American country is set to post its sharpest rise in prices this year since a period of hyperinflation around 1990, an extreme case even in a world widely battling to tame inflation pushed up by Russia’s invasion of Ukraine.”My income is no longer enough,” said Sergio Omar, who spends 12 hours a day trawling through mountains of waste from a landfill in Lujan, 65 kilometers (40 miles) outside capital Buenos Aires, in search of cardboard, plastic and metal which he sells.Omar, 41, said food costs had spiked so much in recent months that it had become hard to feed his family with five kids. He said an increasing number of informal workers would come to the waste dump to find any items they could sell in the struggle to survive.”Twice as many people are coming here because there is so much crisis,” he said, explaining he could make between 2,000 and 6,000 pesos ($13-$40) per day selling recyclable waste.At the dump, Reuters saw men and women searching for usable clothing and even food, wading through piles of rubbish where gas given off by the decomposing waste created sudden fires. There were many rats, wild dogs and scavenger birds.A century ago Argentina was one of the world’s most affluent countries. But in recent years it has slid from one economic crisis to another and has struggled to keep inflation in check.Now, prices are rising at the fastest since the 1990s – with existing problems caused by money printing and vicious cycles of price hikes by businesses now compounded by global increases in the costs of fertilizers for farming and gas imports.Inflation likely rose 6.7% in September alone, analysts polled by Reuters said, ahead of official data expected to be released on Friday. That has led the central bank to hike the interest rate to 75%, with the possibility of more rises.Poverty levels were over 36% in the first half of 2022 and extreme poverty rose to 8.8%, some 2.6 million people. Government welfare programs helped prevent it rising higher, but there have been calls by some for more social spending despite limited state funds.In 2001, during one of Argentina’s worst economic crises, Sandra Contreras set up the Lujan Barter Club. That’s now taking off again as Argentines, unable to keep up with prices, look to exchange things like old clothes for a bag of flour or pasta.”People come very desperate, their salaries are not enough, things are getting worse day by day,” Contreras said, adding that people would start queuing two hours before the barter club opened each morning.”People have no money left, they need to take something home, so there’s no choice but to barter.”Pablo Lopez, 26, who works in a small recycling center, said that the scars of rising prices were clear to see.”This inflation is a madness, you can see it here with the people who come to work that inflation hits us all,” he said.($1 = 150.5300 Argentine pesos) More

The decision by Opec+ to cut oil output from next month risks tipping the global economy into recession and higher crude prices will increase energy security risks worldwide, the International Energy Agency has warned.Last week’s move by the oil cartel, led by Saudi Arabia, and its allies, including Russia, to cut their production target by 2mn barrels a day has reverberated around the world. The US has accused Saudi Arabia of aligning with Russia to drive up oil prices at a time when much of the world is struggling to manage rising inflation.The Paris-based IEA, which advises OECD countries on energy policy, said the planned cuts had already dented global oil demand.“The Opec+ bloc’s plan to sharply curtail oil supplies to the market has derailed the growth trajectory of oil supply through the remainder of this year and next, with the resulting higher price levels exacerbating market volatility and heightening energy security concerns,” the agency said on Thursday in its monthly oil report.“With unrelenting inflationary pressures and interest rate hikes taking their toll, higher oil prices may prove the tipping point for a global economy already on the brink of recession,” it added. The warning came after the IMF this week lowered its world economic growth outlook for 2023 to 2.7 per cent, its lowest year ahead growth forecast since 2001, and predicted that next year could feel like a recession in much of the world.Oil demand in the final three months of the year is now expected to fall by 340,000 b/d compared with last year, the IEA said. The agency cut its forecast demand growth for 2023 by 470,000 b/d to 1.7mn b/d.But even with lower global demand, the “massive cut” in Opec+ oil supply would “sharply reduce” the world’s ability to replenish stocks through the rest of the year and the first half of 2023, it added. At the end of August, OECD oil reserves were 243mn barrels lower than their five-year average at 2.7bn barrels, it said.

Saudi Arabia has defended the cuts, arguing they are needed to avoid a collapse in oil prices that would damage long-term supply. The Opec+ decisions were based “purely on economic considerations” and not “politically motivated” to hurt the US, the Gulf kingdom’s foreign ministry said on Thursday.Given that many Opec+ members are already failing to meet their targeted production levels, the actual drop in physical oil supply due to the cuts is expected to be about 1mn b/d from November, the IEA said. However, Opec+ supply could fall further following the full implementation of the EU’s embargo on Russian crude, imposed over the war in Ukraine, from December 5, it added.Next year the IEA expects Russian oil production to average 9.5mn b/d, down from 10.9mn b/d in 2022, with close to 2mn b/d of production disrupted due to the widening impact of sanctions.“We expect Russian oil output to ease gradually from next month and assume the decrease will deepen in December when the EU embargo on Russian crude oil takes effect,” it said.The agency warned that Russian output could full further if, as Russian officials have threatened, Moscow cuts its own production to offset any negative impact from a proposed price cap on Russian oil exports. More

Investing.com — The European Central Bank may have to raise its key interest rate above 3% to tame inflation that has been higher and more obstinate than expected this year, one of its top policymakers said on Thursday.Belgian National Bank Governor Pierre Wunsch told CNBC in an interview that interest rates will have to rise above the rate of inflation at some point, although it wasn’t clear when that crossover will happen.”You know, we’ve been claiming that what happens in Europe is different from the U.K. and the U.S., but over the last six months, basically, the direction we’ve been taking was not been that different,” Wunsch told CNBC, in a stark contradiction of the explanation repeatedly given by President Christine Lagarde for the ECB’s reluctance to tighten monetary policy as quickly as other central banks have.”So my bet would be that it’s going to be over 2% and I would not be too surprised if it goes to above 3% at some point,” Wunsch added.The ECB only ended an eight-year experiment with negative interest rates in July, raising its key deposit rate to 0% from -0.5%. It then raised it again in September by 75 basis points to 0.75% and flagged between three and four more rate hikes going forward.Despite its action, the ECB’s interest rates are still deeply in negative territory once adjusted for inflation, which ran at 10.0% in September. The ECB expects inflation to average 5.5% next year and 2.3% in 2024.Analysts have argued that the ECB’s scope for further interest rate hikes will be constrained by a sharp economic slowdown currently ongoing. Wunsch acknowledged that a recession in the Eurozone is fast becoming a “base case” scenario.Reuters reported on Wednesday that the ECB is also likely to tighten conditions in the money market in another way at its October meeting, with a change to the rules of its ultra-long-term lending operations that could wipe millions of euros off Eurozone banks’ profits. At present, banks are able to park money that they borrowed at around zero in so-called TLTRO operations back at the ECB’s deposit facility, earning a spread of 75 basis points for no risk at all. More

Ikea has returned to cutting prices on some of its main products after a supply chain shock and a sharp rise in raw material costs forced the world’s largest furniture retailer to pull back from its strategy of making items cheaper. Jon Abrahamsson Ring, chief executive of Inter Ikea, which owns the brand and concept, told the Financial Times that it had absorbed more than €1bn of cost increases before it raised prices by an average of 9 per cent at the end of last year.He added that the December price increases “really hurt us in our hearts” as Ikea likes to cut prices of its products over time, and so in recent months the group had started investing in lowering the cost of popular items such as Kallax shelves and Klippan sofas.“Ikea is not immune to inflation. But we held back on price increases,” said Jesper Brodin, chief executive of main Ikea retailer Ingka. “It is our business model to try to cut prices, not just something philanthropic. Already in summer we started to decrease prices in our key [product] families.” Companies around the world have been hit hard in the past year by a sharp rise in costs for transporting goods and raw material prices. But there have been signs in recent months of prices for container shipping and some commodities coming down.Ikea, which according to Brodin prides itself on serving people with “thin wallets”, has struggled to keep some of its most popular products in stock due to the problems in the supply chain. But the Netherlands-based retailer has now built up sufficient stockpiles of some key products that it can try to entice shoppers with in the cost of living crisis through lower prices.“Already today, we are already seeing opportunities where we can invest through conscious and strong price investments. We are focusing even more on designing for the low-price segment,” said Ring, who noted that such products account for half of Ikea sales.Ingka had, for example, lowered the price of some Kallax shelves in Poland by 20 per cent, which had increased sales by 50 per cent; in Belgium, it lowered prices of Billy bookshelves by 10 per cent and boosted sales by 60 per cent; while in the Netherlands it cut prices of some cooking products by 20 per cent.Ikea posted record revenues of €44.6bn for its financial year to the end of August, up 6.5 per cent compared with the previous period. Brodin said the past year had tested Ikea “like never before” as it dealt with supply shocks, the war in Ukraine that led to the shuttering of its Russian business that accounted for 4.5 per cent of sales, and the tail-end of the Covid-19 pandemic.Inter Ikea said that shoppers had returned to its stores — both its classic large out-of-town shops and smaller city-centre ones — with sales increasing by 13 per cent. However, online sales fell by 10 per cent year on year.Ring insisted that was not a problem as online sales at Ikea have risen from just above 5 per cent of total revenues five years ago to 22 per cent currently, and that the drop last year was natural as shoppers in many countries had only being able to buy from its website during the pandemic.Ikea reports full-year profits later in the year. More

NEW YORK (Reuters) – Federal Reserve officials are pushing back on investors’ mounting concerns that the U.S. central bank’s aggressive campaign to counter high inflation is setting the stage for a market crack-up. Central bankers’ confidence is countered by wide-ranging fears among market participants who see bond market liquidity strains, damaging asset price declines as well as a range of problems in markets abroad. Some see this landscape as dire enough to call for the Fed to slow or even consider stopping its interest rate increases, something officials have so far shown no appetite for as they contend with the worst inflation surge in 40 years.”We have to be monitoring things in the financial markets, and we have to be looking for vulnerabilities as you’re increasing rates,” Cleveland Fed President Loretta Mester told reporters on Tuesday, especially in an environment where all the world’s major central bankers are moving in the same direction toward tighter monetary policy. “That’s when these vulnerabilities that you don’t necessarily see in normal times, and you’re not changing rates, can come out,” Mester said. But as things now stand, “I don’t see hidden big pending risks out there” and “there’s no evidence disorderly market functioning is going on at present.” So far, Fed liquidity tools have shown no signs of market distress. Foreign central banks have not tapped a tool that lends dollars in any notable size, and other lending facilities have yet to see any unusual activity. A measure of market stress produced by the St. Louis Fed suggests financial stress is below average. The view outside the Fed is quite different, however. “Global markets are increasingly showing signs of instability,” said Roberto Perli, head of global policy research at Piper Sandler. “The most prominent example is the U.K., where the Bank of England has already been forced to intervene to shore up pension funds, but creaks are showing up in Europe, (emerging markets), and in the U.S. as well.” Tobias Adrian, the International Monetary Fund’s monetary and capital markets director, wrote on Tuesday that financial stability risks have risen “substantially.” Adrian, who used to work at the New York Fed, flagged mounting signs of trouble for global government debt markets at a time when borrowing levels are high. Risk-taking is also on the decline and thin markets run the risk of propagating any shocks that should arise, Adrian said. What’s more, the pressure on markets may get even more pronounced as major central banks continue to make the cost of credit more expensive.ROOM TO GET TIGHTER Financial conditions have undergone a rapid tightening this year and have plenty of room to get even more restrictive, new Bank of America (NYSE:BAC) data says. It said its newly launched Indicator of U.S. Financial Conditions shows the speed of the tightening may be more notable than the actual level of tightness, which so far remains below that of other episodes of turbulence.The index has climbed from neutral to current levels in 10 months. That took five years in the Fed’s last rate-hike cycle.”If prior cycles are any guide, financial conditions can get tighter – and may need to – to generate the softening in labor market conditions that the Fed desires, particularly in an environment where re-opening forces are generating exceptionally strong labor demand,” Bank of America economists wrote.The Fed has pushed its overnight target rate range up at a pace that breaks with the gradual approach used in recent decades. Fed officials have lifted the federal funds rate from near-zero levels in March to the current range of between 3.00% and 3.25%. Financial markets expect the Fed to raise the rate again by three-quarters of a percentage point at its next policy meeting in November. More rate rises are very likely after that, with central bankers penciling in a 4.6% federal funds rate by some point in 2023. Making financial conditions more restrictive is key to how monetary policy operates. By lifting the cost of credit and making risk-taking and investment more expensive, the Fed cools overall economic momentum and lowers inflationary pressures. On Friday, a top Fed official said monetary policy may be taking a bigger bite out of economic momentum than many recognize. New York Fed President John Williams said so-called neutral interest rates are “just much lower now” than in the recent past. That means in real terms, the current federal funds rate is “actually tighter monetary policy than that would be, say in the early 90s or something like that.” It remains unclear how the Fed might respond to market trouble. Financial stability is core to its mission, so a big meltdown would likely garner some sort of reaction. San Francisco Fed President Mary Daly said last week “we definitely don’t raise rates until something breaks.” But Fed Governor Christopher Waller, speaking last week, said he was “a little confused” by the worries over financial stability risks. “While there has been some increased volatility and liquidity strains in financial markets lately, overall, I believe markets are operating effectively,” he said, adding that he doubted a market issue would affect the rate rise outlook. More