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Bob Carey
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  US Economy and Credit Markets Ended Feb. 11, 2022
Posted Under: Weekly Market Commentary
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US inflation accelerated to 7.5% in January, its highest level since 1982, from 7% in December, and has now increased in each of the last 5 months. Used-car prices jumped 40% from last January and were a major contributor to the overall increase, but price increases were broad-based in the latest reading of the Consumer Price Index. The report should embolden the Fed to begin raising interest rates at its March meeting, and potentially by more than its standard quarter-point increase. The market now sees about a 50-50 chance that the Fed will raise interest rates by 0.50% in March, as opposed to just 0.25%. Federal Reserve Bank of St. Louis President James Bullard said Thursday following the CPI report that the Fed needs to be "far more reactive" to the inflation data. The market also now sees 6 rate hikes in 2022, up from 5 the prior week and only three at the end of last year, highlighting that economic data released this year has only increased the urgency at which the Fed needs to raise interest rates. Concerns over inflation weighed on consumer sentiment with the latest reading of the Consumer Sentiment Index falling well below expectations to its lowest level since October 2011. The 10-year US Treasury yield reached 2% for the first time since 2019 last week on the inflation news. Yields pulled back on Friday, however, in a flight to safety on news that the U.S. believes Russia could soon invade Ukraine. Major economic reports (related consensus forecasts, prior data) for the upcoming week include Tuesday: January PPI Final Demand MoM (0.5%, 0.2%), February Empire Manufacturing (12.0, -0.7); Wednesday: January Retail Sales Advance MoM (1.9%, -1.9%), January Industrial Production MoM (0.4%, -0.1%), February 11 MBA Mortgage Applications (N/A, -8.1%); Thursday: February 12 Initial Jobless Claims (220k, 223k), January Housing Starts (1698k, 1702k); Friday: January Existing Home Sales (6.10m, 6.18m), January Leading Index (0.2%, 0.8%).
Posted on Monday, February 14, 2022 @ 8:03 AM • Post Link Share: 
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