Since the beginning of the year, the rate of increase in consumer prices in the United States has accelerated in June, which challenges the Fed’s view that the inflationary pressures that erupt with the reopening of the economy will prove to be temporary.

In June, the consumer price index rose 5.4% year-on-year, higher than the nearly 13-year high of 5% Report In May, it exceeded the 4.9% forecast by economists.

The monthly data released by the US Bureau of Labor Statistics showed that prices rose by 0.9%, much higher than the 0.6% in May.

Excluding volatile items such as food and energy, the “core” CPI rose from 3.8% in May to 4.5% in June from the same period last year.

In the heated debate about the risk that ultra-loose fiscal and monetary policies contribute to the risk of losing control of consumer prices, investors, economists and policy makers have carefully studied the upcoming inflation data.

So far, price increases have been most pronounced for industries directly affected by the coronavirus pandemic. Travel-related expenses such as air tickets have soared, and the shortage of semiconductors has caused the price of used cars to rise.

The U.S. Central Bank has long described the increase in inflation data as “temporary”, which gradually faded as the Covid-19 blockade was further relaxed and supply caught up with pent-up demand.

Market indicators of inflation expectations are consistent with this view, with long-term indicators lower than short-term indicators. The 10-year break-even ratio is a popular indicator that has fallen from a recent high to about 2.3%, while the two-year break-even ratio has fallen slightly from its peak in May, hovering below 2.7%.

Plummet Treasury bond yield It also reflects that concerns about inflation exceeding the Fed’s 2% target are fading – this move is partly driven by the prospects that the central bank may face Tighten policy Faster and more positive than initially expected.

Yields soared in the first quarter of this year, as Wall Street expects consumer price increases to erode the value of the fixed payments they provide, dumping US government bonds in droves. They have fallen sharply since June, but after their release on Tuesday, the benchmark 10-year bond trading price rose to 1.37%.

This is still well below the recent peak in March, close to 1.8%.


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