The US price index based on personal consumption rose 5.4 percent from January last year to last month, while the index excluding food and energy rose 4.7 percent. In advance, respectively, 5.0 and 4.3 percent were expected. In either case, the annual price increase was also higher than it was in December.
This is another nail in the coffin of the narrative that the Fed’s rate hikes quickly lower inflation in the world’s largest economy. Thus, traders are anticipating that central bank governor Jerome Powell will have to seal a nice deal even more. The futures market is now pricing in a 59 percent chance that the policy rate at the end of the year will be at least 0.75 percentage point higher than today. A month ago, such an outcome was considered likely by only 0.2 percent. The last time the federal funds rate was 5.25 percent was in early 2001, during the dotcom crash.
It is also worth considering how quickly these price hikes will occur. In June, the Fed will raise the key interest rate by at least 5.25 percentage points in just 15 months. Before the financial crisis, the total increase was 4.25 percentage points spread over 24 months. Before the dot-com crash, the interest rate was raised from 2.75 to 6.25 percent over a period of more than six years.
In other words, there are good reasons for the stock market to continue falling. At 4 a.m. on Friday, the Euro Stoxx 600 Index was down 0.8 percent, while the S&P 500 lost 1.6 percent. The Nasdaq, which contains a larger percentage of developing stocks, was down 2.1 percent.
Among individual stocks, Boeing did particularly well. The share fell 4.3 percent on Friday afternoon, as a result of the aircraft manufacturer pausing deliveries of the 787 Dreamliner models. The reason is the problems with the fuselage itself.
Media and entertainment giant Warner Bros. Discovery’s share price is down 1 percent, and here’s the explanation for the disappointing up and down numbers in the fourth quarter.
In our part of the world, BASF took off with a bang. The German chemical manufacturer announced lower profitability, and now the number of employees will be reduced by 2,600. In addition, the buyback of private equity will be terminated. The group’s main problem is the more expensive inputs. The share fell 7 percent.
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