Long-term U.S. Treasury yields jumped to a three-year high on Monday, fueling a global rise in borrowing costs as traders intensified bets on aggressive rate hikes from major central banks.
The Fed last month kicked off what’s expected to be a series of interest rate hikes to tame inflation, but the efforts to temper demand will take time to materialize.
The UN Food and Agriculture Organization said its Food Price Index, which tracks monthly changes in international prices for a basket of commodities, averaged 159.3 points last month, up 12.6% from February.
Not-for-profits of all kinds are getting hurt by inflation, experts say. Price and wage increases are stressing them in multiple ways, making it harder to keep up with their own basic operational expenses while also forcing them to curtail the services they provide.
The next few months will test whether President Joe Biden built a durable recovery full of jobs with last year’s $1.9 trillion relief package, or an economy overfed by government aid that could tip into a downturn.
In minutes from their policy meeting three weeks ago released Wednesday, Fed officials said that half-point interest rate hikes, rather than traditional quarter-point increase, “could be appropriate” multiple times this year.
Squeezed by inflation, consumers increased their spending by just 0.2% in February, down from a much larger 2.7% gain in January. Adjusted for inflation, spending actually fell 0.4% last month.
Big companies have successfully raised prices for their products because their customers have kept lining up regardless. What’s uncertain is how much longer the trend may last, before customers sharply cut back on their purchases.
Looking ahead, growth is likely to slow sharply this year, particularly in the first three months 2022. Higher inflation will likely weigh on consumer spending as Americans take a dimmer view of the economy.
The introduction of the minimum tax on the wealthiest Americans would represent a significant reorienting of the tax code.
Federal Reserve Chairman Jerome Powell said that if necessary, the central bank would be open to raising rates by a comparatively aggressive half-point at multiple Fed meetings. The Fed hasn’t raised its benchmark rate by a half-point since May 2000.
With inflation raging at four-decade highs, economists and investors expect the central bank to enact the fastest pace of rate hikes since 2005. That would mean higher borrowing rates well into the future.
The Labor Department said Tuesday that its producer price index—which tracks inflation before it hits consumers—rose another 0.8% from January to February.
The average price of gasoline at the pump is $1.54 higher per gallon than it was a year ago.
Investors have ramped up expectations for an aggressive Fed posture in the face of the highest inflation in four decades. But the economists say the outlook has become muted by uncertainty over Ukraine, sanctions and surging commodities prices.
For the 12 months ending in February, grocery prices leapt 8.6%, the biggest year-over-year increase since 1981, the government said. Gas prices are up a whopping 38%. And housing costs have risen 4.7%, the largest yearly jump since 1991.
Critics see this new Biden effort as largely an attempt at political damage control, rather than a data-driven approach to reducing inflation.
How much Americans will pay for a steak is going to be tested in the near future.
Chairman Jerome Powell said Wednesday that he supports a traditional quarter-point increase in the Federal Reserve’s benchmark short-term interest rate when the Fed meets later this month, rather than a larger increase that some of its policymakers have proposed.
The president acknowledged that millions of Americans still face financial hardships, particularly as the cost of groceries, gasoline, cars and rents have skyrocketed in what has become the fastest period of inflation in four decades.
