• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Investing Core inflation remains high, meaning more interest rate hikes coming
Investing

Core inflation remains high, meaning more interest rate hikes coming

by December 19, 2022
by December 19, 2022 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

While inflation data came in last week which showed figures softer than the previous month in the eurozone, the US and the UK, the fight is far from over.

Inflation remains extremely elevated around the globe. I put together the below table which presents the latest inflation numbers across a selection of countries. Remember, 2% is the typical inflation target which central banks set, and which most remain adamant they will fight to return to. I’ll let you read the table below but, suffice to say, these numbers are just a little bit north of 2%.

Rate hikes won’t end anytime soon

With these numbers in mind, interest rate hikes won’t be ending anytime soon. While the latest rate hikes of 50 bps in Europe and the US may have been seen as hopeful by some investors, given that it was 25 bps lower than the previous two months which brought 75 bps hikes, the market is very much pricing in more hikes.

The optimism in the immediate aftermath of the positive inflation reading in the US, for example, was quickly dampened, with stocks pulling back following hawkish comments from the Federal Reserve. The below chart shows that December is now looking as bad as most other months in 2022.

ECB president Christine Lagarde said monetary tightening “still has a ways to go” and to expect interest rate rises of 50 bp increments going forward. She also acknowledged that underlying inflationary pressures would “persist for some time”.  Federal Reserve chairman Jerome Powell echoed these comments shortly after.

Headline inflation falling but core inflation persisting

While headline inflation has fallen across most major economies in recent months, core inflation has not – which is where the problem now truly lies.

Core inflation is generally considered the better gauge of long-term inflation because it strips out the effects of food and energy. These two measurements are much more volatile, especially this year as the world has been plunged into an energy crisis off the back of Russia’s war in Ukraine.

Last week, policymakers in the US revised their core inflation estimate for next year up to 3.5%, from the 3.1% forecast in September. This is the same week that saw the fall in headline inflation and the (albeit temporary) pump up in the stock market because of it.

What happens next?

This divergence between core and headline inflation highlights the issue at hand. Headline inflation may well have peaked. But core inflation – which is what really matters from a monetary point of view – remains stubbornly high, even if it is rising at a slower rate.

This is why the market has peeled back over the last month, but it is also what should give investors reason to pause when considering entering the market at this juncture. While forecasting inflation and central bank actions has been very challenging in recent times, as long as core inflation remains elevated, rate hikes are inevitable and equity valuations will continue to be suppressed.

With no tangible weakness yet seen in the labour market, perhaps it is no surprise that core inflation remains high. And unfortunately, the only way out of this is through more interest rate hikes.

The worst thing about boom-bust cycles is that, unfortunately, that means that now again, you must endure a bust.  

The post Core inflation remains high, meaning more interest rate hikes coming appeared first on Invezz.

You Might Also Like
  • Housing Prices in the UK Expected To Drop In 2023
  • How to Use the Finest Covered Call Strategy to Manage Portfolio Volatility
  • 4 market-moving events to watch in December
  • ConsenSys reveals it collects IP addresses of MetaMask users
Share
0
FacebookTwitterPinterestWhatsapp

previous post
America’s at a Crossroads: Liberty or State Control? | Samuel Gregg & Kate Wand (Video)
next post
Elon Musk may soon step down as Twitter CEO: buy Tesla stock?

You may also like

Cleveland-Cliffs stock has upside to $26: Morgan Stanley

January 12, 2023

4 market-moving events to watch in December

November 29, 2022

A Standoff over Gas Price Cap Puts on Hold EU...

November 25, 2022

Duck Creek stock opened 50% up on Monday: here’s why

January 9, 2023

Bernstein analyst reacts to TSMC boosting investment in the U.S.

December 6, 2022

Wide, flat SPX Diagonal Spread

January 16, 2023

2 takeaways after area PMIs hint at a brighter inflation...

November 24, 2022

Options Trading Strategy: Bull Call Spread

May 9, 2023

7 Skills You Have To Master To Play In The...

December 29, 2023

Ford is now the second best-selling EV maker in the...

December 2, 2022

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,632 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    This market technician sees S&P 500...

    January 11, 2023

    2 reasons to buy UK equities...

    December 21, 2022

    HSBC share price: Winds of change...

    January 2, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here