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The inflation rate in the United States in April was 4.2% higher than a year ago. Bigger jump Exceeding economists’ expectations, it has heightened concerns about overheating in the world’s largest economy.
The higher inflation rate reflects a combination of substantial financial support, supply bottlenecks, and increased spending, as economic activity has increased with the introduction of the coronavirus vaccine.
U.S. stock market fell After the inflation report was released, the Standard & Poor’s 500 Index closed down 2.2%, the biggest one-day drop since February. Nasdaq (Nasdaq) is a high-tech company, its company is particularly sensitive to higher inflation and interest rates, but the stock fell by about 2.7%.
The sell-off of US Treasury bonds also accelerated, with the yield on the benchmark 10-year Treasury bond rising by 0.06 percentage points to 1.68%.
The growth comes as the European Commission has substantially raised its economic expectations for the next two years. With the acceleration of vaccination campaigns, the Eurozone has recovered from the pandemic.
Brussels said that the euro zone will grow by 4.3% this year and 4.4% in 2022, compared with previous forecasts of 3.8% growth in two years.
In the United States, the inflation rate has risen by 4.2%, The biggest increase since 2008 This is a significant leap from the 2.6% reading in March.
The surge reflects the relatively low level of inflation at the beginning of the coronavirus outbreak. This poses a challenge to US economic policymakers in the Federal Reserve and the Biden administration, who continue to pursue huge monetary and fiscal stimulus packages to help the United States recover from the pandemic.
In response to this data, the White House Council of Economic Advisers stated that the US economy has recovered from the pandemic and is undergoing a “normalization” of prices. “As strong demand meets the recovery of supply, the months of the month will be lower or higher than expected. Recovery from the pandemic is not linear. The Council of Economic Advisers will continue to monitor the data entered.”
Fed Vice Chairman Richard Clarida stated that he was “surprised” by the significant increase in the inflation rate, but he still expects that the inflation rate “will return or may be slightly higher than what we have in 2022 and The long-term goal of 2% in 2023″.
He said that if “excessive demand relative to supply” and continued and push up inflation, the Fed “will take action without hesitation and use our tools to reduce inflation.”
Some Republicans used these data to emphasize that both the Biden administration and the Federal Reserve underestimated the risk of rising inflation.
Senator Pat Toomey, Republican of Pennsylvania, wrote on Twitter: “With the release of the Consumer Price Index this morning, it is clear that inflation has arrived.” The Fed can no longer pretend that this is a distant problem. . It is time for the Fed to reconsider its easing policy stance. ”
However, many economists do not expect inflation to continue to rise.
“We agree with the Fed’s view that this is not the beginning of an upward spiral in inflation. We look for supply [and] By 2022, demand imbalances will gradually be resolved, and the pace of inflation will gradually cool down. “Said Kathy Bostjancic and Gregory Daco of Oxford Economics.
Ian Shepherdson of the Pantheon Institute for Macroeconomics said: “After a shocking CPI report is released, the Fed will not panic, so you can expect to hear it in the coming weeks More information on inflationary pressures on temporary bottlenecks. “However, this report does mean that the first part of the story of high inflation-the surge in reopening-is real. This is no longer a forecast, and there will be even greater growth. “
Fed officials are more tolerant of inflation, partly because consumer prices often hover below the central bank’s 2% target. Even with loose monetary policy, they are still trying to make it appreciate.
Despite limited concerns about the Fed and Treasury bonds, US companies’ awareness of rising inflation rates has become quite common and investors have seen them as the cause of the sharp rise in inflation. Stock market sell-off this week.
Warren Buffett, chief executive of Berkshire Hathaway, said this month that his company’s executives have seen “very severe” inflation. “People are raising prices to us and being accepted by people.”
Tyson Foods said this week that it has substantially increased its prices. The company’s chief operating officer Downey King said: “In general, the intensified inflation environment is bringing meaningful resistance to prepared foods in the second half of the year.” “We have seen raw material costs rise by more than 15%, and logistics , Packaging and labor costs are also increasing.”
Additional reporting by Matthew Rocco and Colby Smith
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