losses on the stock exchanges
US inflation is gaining momentum
06/10/2022 2:32 p.m
Inflation in the US is rising faster than expected. In May it climbed to 8.6 percent – the highest level in more than 40 years. This is not good news for investors.
High inflation is taking hold in the US. It was 8.6 percent in May, the highest level since December 1981, according to the BLS statistics agency. That’s higher than expected. Analysts had previously expected inflation to be 8.3 percent for the year – and thus stabilize at the April level. Material bottlenecks and increased energy costs, also as a result of the Ukraine war, are keeping price pressure high.
At the beginning of May, the Fed took the largest interest rate hike in 22 years and raised the key interest rate by half a point to the new range of 0.75 to 1.0 percent. Fed President Jerome Powell signaled hikes of the same magnitude for the June and July meetings.
The stock exchanges reacted to the current inflation figures with price losses. The reason: Now the pressure on the Fed could increase to raise interest rates more than planned. This makes stocks less attractive compared to other forms of investment. In addition, interest rate hikes slow down the economy.
“It is becoming increasingly clear that the central bank initiated its monetary policy turnaround too late. The time for large interest rate hikes of 50 basis points is far from over,” said analyst Christoph Balz from Commerzbank. In the longer term, inflation will probably remain higher than before the pandemic anyway. Due to the tight labor market, wage costs rose more than they had in at least 20 years.
“We had assumed that US inflation had already passed its upper turning point and were taught better today,” said Dirk Chlench from LBBW. Analyst Bastian Hepperle from the private bank Hauck Aufhäuser Lampe said: “That should be the inflation peak. Still out of breath from the summit storm, the descent is initially difficult.”