Economy
Inflation Expectations Decline as Gas Prices Drive Headline Price Increase
The Federal Reserve’s ongoing battle against inflation has seen a positive turn, with consumer inflation expectations falling to their lowest level since the Fed initiated interest rate hikes in September 2021. The data, released on Friday, reveals that consumers anticipate a 3.1% rise in prices over the next year, a drop from last month’s expectation of 3.5%, according to the University of Michigan. The reading is the lowest since March 2021.
Expectations for price increases over the next 5-10 years also exhibited a downturn, sliding to 2.7% in September from 3% the previous month. This positive sentiment coincides with a pause in the deceleration of inflation. On Wednesday, the Consumer Price Index (CPI) showed an increase of 0.6% over the last month and 3.7% over the prior year in August, marking an acceleration from July’s 0.2% monthly rise and 3.2% annual gain.
“Consumers have taken note of the stalling slowdown in inflation, but they do expect the slowdown to resume,” stated Joanne Hsu, director of the Survey of Consumers for the University of Michigan.
The primary driver behind August’s headline price increase was gas prices. However, core inflation, which excludes volatile food and energy categories, saw a slowdown in August, rising by only 4.3%, compared to July’s 4.7% increase. Economists largely interpreted Wednesday’s CPI print as showing signs of disinflation and not being a significant outlier to prompt the Federal Reserve to raise interest rates at its policy meeting on September 19 and 20.
Neil Dutta, an economist at Renaissance Macro, described Friday’s consumer sentiment reading as “notable” and “welcome for the Fed to take a step back for the fall.” Fed Chair Jerome Powell has previously emphasized the importance of consumer inflation expectations.
“It is a good thing headline inflation has gone down a bit,” Powell stated on July 26, when headline inflation had recently reached 3%. “I would say that having headline inflation move down that much…will strengthen the broad sense that the public has that inflation is coming down, which will, in turn, we hope, help inflation continue to move down.”
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© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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