Original title: Inflation whirlwind spreads again!Britain and Canada sounded the alarm, interest rate hikes or welcome new members
The October CPI of many major economies in Europe and the United States exceeded 4%.
When emerging economies are struggling to curb price pressures, a new wave of inflation has also begun to spread to developed countries.
After the US Consumer Price Index (CPI) broke the 6% mark in October, the UK and Canada, which released inflation data on Wednesday, also showed an accelerated upward trend. Facing the continued supply chain bottlenecks under the influence of the epidemic, the pressure of central banks in various countries to change their policies is gradually increasing.
Multiple factors push up price pressures
Data released by Statistics Canada on Wednesday showed that driven by the sharp increase in gasoline and housing prices, the country’s CPI rose to 4.7% in October from the previous 4.4%, a new high since 2003.This is the seventh consecutive month that the overall price index has exceeded the 1-3% control range set by the Bank of Canada.
It is worth noting that the current round of inflationary pressures are all-round. The eight categories of inflation statistics in Canada have collectively risen again since September. Considering that the current railway to Vancouver, Canada’s largest port, was cut off by floods and landslides on the west coast of British Columbia, supply chain risks may continue to expand. Derek Holt, head of capital market research at Scotiabank, issued a warning: “The situation is more severe in the future, especially the impact of port disruption. I think the inflation rate will far exceed 5% by the end of this year. .”
The CBN reporter noted that at the interest rate meeting held on the 27th of last month, the Bank of Canada Policy Committee decided to end the quantitative easing program since the epidemic and promote the gradual normalization of monetary policy. The policy statement shows that due to supply disruptions and rising energy prices, the upward risk of inflation cannot be ignored. Price pressures may continue until the end of 2022. The recent round of higher-than-expected upward price pressures poses a huge test for the new Canadian government and the central bank. .
Earlier in the day,The latest data released by the National Bureau of Statistics of the United Kingdom showed that the CPI rose 4.2% year-on-year in October, the highest increase since November 2011.This figure is a sharp increase from the 3.1% in September and the 3.9% expected by economists.The continuous increase in natural gas prices is indispensable.Excluding energy, food, alcohol and tobacco prices, the core CPI jumped from 2.9% to 3.4%, which was also much higher than expected.
Kallum Pickering, senior economist at Berenberg Bank, pointed out that the sources of inflation in the UK are becoming more widespread. “This round of price hikes is driven by the rapid recovery of domestic demand and global supply shortages. In addition, the unique Brexit effect of the United Kingdom cannot be ignored, which has increased the cost of trading with the EU, its largest trading partner.” Say.
Rising prices have also troubled British Chancellor of the Exchequer, Rishi Sunak, because it has raised the cost of paying for inflation-linked government bonds. As more and more companies are planning to pass on costs to consumers to alleviate the pressure from rising wages and other costs, the UK retail price index rose to 6% in October, the highest since April 1991. The rapid growth rate, and this data determines the amount of income payment of Phnom Penh bonds linked to the index.
The Bank of England may trigger interest rate hike conditions
Since the fourth quarter, interest rate hikes in emerging market countries have spread throughout Central and Eastern Europe and Latin America. The latest example is Mexico. Last week, the Mexican Central Bank announced a 25 basis point increase in interest rates at its policy meeting for the fourth consecutive time, raising the benchmark interest rate to 5.00%. The bank stated in its policy statement that the shocks that lead to increased inflation involve a wide range, which brings greater risks to the price formation process and inflation expectations.
Food and energy price pressures are continuing to be released. According to a report released by the Food and Agriculture Organization (FAO) earlier this month, the food price index in October 2021 averaged 133.2 points, a year-on-year increase of 31.3%, reaching the highest level since July 2011. The linkage of crude oil and coal markets triggered by the soaring natural gas price has also attracted attention. With the advent of winter in the northern hemisphere, heating demand and insufficient inventory have become a major challenge for many places. In the United States, the price of coal in central Appalachia rose to US$89.75 per ton this week due to the global power crisis driving export demand, the highest level since 2009. The European energy crisis is also making a comeback. On the 16th, the German energy regulator stated that the country has suspended the certification process for the controversial Beixi No. 2 project, and European natural gas prices soared by more than 10% that day. On the 17th, Belarus announced the “temporary overhaul” of the Russian-European oil pipeline. Countries such as Poland, Hungary, the Czech Republic and Germany will be affected.
Boris Schlossberg, a macro strategist at BK Asset Management, an asset management agency, said in an interview with a reporter from China Business News that the issue of rising prices of agricultural products and energy under the imbalance between supply and demand seems to be difficult to solve in the short term, which means that inflation affects. It may be expected to be longer. He analyzed to a reporter from China Business News that the main factors driving price increases are undergoing dynamic changes. for example,Increasing energy prices, including natural gas and coal, are pushing up electricity price pressure this winter. This is the biggest risk of short-term inflation. Next, price pressure may shift from the commodity side to the service side.
At the same time, the supply chain bottleneck caused by the epidemic is still lingering, and the accumulation of goods in multiple major ports is difficult to solve. This also brings out-of-stock risks and price pressures to the upcoming holiday shopping frenzy. The yields of 10-year treasury bonds in many major economies in Europe and the United States have fluctuated higher this month, reflecting to a certain extent the market’s concerns about inflation risks and central bank tightening policies.
Schrosberg told CBN reporters that he believes that short-term inflation risks need to be released, First of all, the demand for energy, food and even housing costs that push up prices is inelastic. Second, the supply chain dilemma is difficult to be properly resolved before the first quarter of next year. The rebound of the epidemic is an important reason. The situation in Europe is worrying. In short, the trend of the epidemic will be the decisive factor in determining the path of inflation.For the central bank, raising interest rates is an important means to suppress prices, but it is difficult to resolve the main contradiction of the supply chain.
Similar to the European Central Bank and the Federal Reserve, the Governor of the Bank of Canada, Tiff Macklem, has emphasized the flexibility of monetary policy in his recent statement, but continues to believe that the drivers of high inflation, such as supply chain disruption and rising energy prices, are Temporarily, this also makes the market’s forecast of the bank’s interest rate hike node point to the second quarter of next year.
In contrast, the UK is likely to become the first major economy to raise interest rates since the epidemic. The Governor of the Bank of England, Andrew Bailey, testified before the British Parliament last week that he was “very disturbed” by the increase in inflation. “Inflation is clearly eating up people’s household income. I am sure people have already felt the price increase. Forecasts. It shows that the cost of living in the UK may increase by as much as 5% in the future,” he said.
The latest employment data also confirms the pace of the UK’s economic recovery. The UK added 160,000 jobs in October and the total number of employed people reached 29.3 million, which has exceeded the level before the epidemic. In addition, in the three months ending in September, the unemployment rate fell from the previous 4.5% to 4.3%, the lowest level since July 2020. This also created a rate hike for the last interest rate meeting of the year on December 16. condition. The current pricing of CME Group MPC SONIA futures shows that the probability of the Bank of England raising interest rates by 15 basis points is 73%. (Yicai.com)
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