The US consumer price index (CPI) jumped 0.9% in October, well above
consensus expectations of around 0.6%. The increase brought the year-over-year
CPI increase to 6.2%, the highest since December 1990. The U.S. Producer Price Index (PPI) also
came in up 8.6%, year-over-year.
the U.S., the latest inflation data paint a similar picture. Eurozone PPI
inflation is running at 16%. Japan’s PPI clocked in at 8%, yet another 40-year
high, and China’s at 13.5%, a level last seen in the mid-1990s. South Korea’s
import prices are rising at 35.8%, the fastest rate since 2008.
current inflation increasingly appears neither transitory nor local.
Inflation in the UK jumped to 3.2% in August from 2%, its highest level in more than nine years. The Office for National Statistics said that much of the spike was due to a substantial drop in restaurant and café prices last year and meaningful increases this year. The RPI which includes housing costs also jumped to 4.8% from 3.8%.
The US Senate passed a roughly USD 1 trillion bipartisan infrastructure package, including about USD 550 billion in new spending. This is aimed at rebuilding traditional transportation infrastructure, improve access to broadband internet in rural areas and upgrade the electric grid and water systems. The Senate Democrats also approved a USD 3.5 trillion budget resolution.
China released a five-year blueprint calling for increased regulation affecting key parts of the economy. The document signalled Beijing’s intention to draft new laws covering national security, technology, monopolies and education. In the technology sector, new legislation will cover areas such as online finance, artificial intelligence, big data and cloud computing.
The European Central Bank (ECB) revised its forward guidance, indicating it would keep interest rates “at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at 2% over the medium term.” The ECB indicated that this process could involve a short period in which inflation goes moderately above this target.
Last month America’s consumer prices inflation rate rose to 4.2% from 2.6% and this is before the full effects of the Biden stimulus plans take affect. Eurozone inflation accelerated to1.6% year-on-year in April, up from 1.3% in March, following a sharp rise in the cost of energy compared to the height of the pandemic. UK annual inflation meanwhile more than doubled in April to 1.5% from 0.7% in March, although both remain below central bank target rates of 2% for now.
The Senate finally passed a budget resolution moving forward legislation authorising the $1.9 trillion stimulus the President requested. This takes the amount of the global stimulus to above $22 trillion.