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LGT Navigator: Inflationary pressure in the US continues to increase

January 13, 2022

The annual rate of consumer price inflation in the United States reached seven percent at the end of last year, the highest level since 1982. However, this was widely expected on stock markets and had already been priced in with the latest communication from the Federal Reserve. The latest edition of the Fed's regular economic report also seems to justify a tightening of the monetary policy stance.

Inflationary pressure in the US continues to increase

On the New York Stock Exchange, investors were unimpressed by the latest inflation figures from the US at midweek. The Dow Jones Industrial and the S&P 500 went out of the day's trading with moderate gains, and on the Nasdaq technology exchange, the indices posted a plus of just under +0.4%. In Asia, stock markets trended today mostly in negative territory. In addition to monetary policy, the pandemic is likely to continue to determine stock market sentiment. 

Inflation trend in the US justifies interest rate expectations

The Federal Reserve anticipated it in its latest communication that inflationary pressure in the US appears to be more persistent than initially assumed, which in turn justifies an interest rate move soon. Over the year, consumer prices rose by +7.0% - the strongest increase in almost 40 years. In November, the inflation rate was still +6.8%. Compared with the previous month, consumer prices rose by +0.5% (consensus +0.4%). The background to the surge in inflation is the sharp rise in energy prices and bottlenecks in global supply chains. Excluding energy prices, core inflation for the year was measured at +5.5% (previous month +4.9%) – the highest rate since February 1991. The capital markets now expect the Fed to raise key rates a total of four times this year. The first rate hike is likely to be implemented as early as March.

Fed Beige Book confirms moderate economic growth with increased wage pressure

According to the Federal Reserve's latest economic report (Beige Book), the US economy is growing at a moderate pace, driven by consumer spending, but held back by ongoing global supply chain issues. The recovery in the labor market is creating labor shortages and driving up wages, which is fueling inflation, it said. The latest Beige Book covers economic activity through January 3 and will serve as the basis for decisions by the Federal Reserve's Federal Open Market Committee (FOMC) at its next monetary policy meeting on January 26.

Slightly weaker inflation trend in China

In China, consumer prices rose less than expected in December. On an annual basis, the inflation rate at the end of last year was +1.5% (consensus +1.7%) compared with an inflation rate of +2.3% in the previous month. At the producer level, prices continued to rise in December, but also by less than expected. Compared with a year earlier, producer prices increased by +10.3%. In November, the inflation rate at producer level had still been +12.9% and in October even +13.5%. Thus, the inflation trend in the People's Republic seems to have weakened somewhat, not least due to the intervention measures taken by China's government on the commodity markets.

Economic Indicators January 13

MEZ Country Indicator Last period
10:00 IT Industrial Production (November, m/m) -0.6%
11:00 EZ ECB Monthly Bulletin
14:30 US Producer Prices (December, m/m) +0.8%
14:30 US Producer Prices (December, y/y) +9.6%
14:30 US Core Producer Prices (December, y/y) +7.7%


Earnings Calender January 13

Country Company Period
SZ Geberit Sales 2021
GE Suedzucker Sales 2021
AUT OMV Q4 Sales
UK Marks & Spencer Q3 Sales
UK Tesco Q3 Sales


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