- US producer prices increase by 0.4% month on month in September – a bigger rise than expected.
- US central bank, the Federal Reserve expected to step on the gas of rate rises.
- Inflation snapshot comes on top of robust jobs market data
- Stronger dollar makes imports into many other countries including the UK, more expensive
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:
‘’There is little relief for the pound coming from across the pond, with the mighty dollar still flexing its muscles after the latest snapshot on US prices. It’s clear that inflation is proving an ever tougher opponent for the Federal Reserve to beat down, raising fresh fears the central bank will have to up its game when it comes to interest rate rises.
Producer prices, the cost of producing goods and services, jumped again in September by 0.4%, more sharply than expected and this will feed through to what consumers will have to pay. This will be yet more uncomfortable reading for Fed policymakers, following on from the latest robust snapshot of the US labour market, with the unemployment rate coming in at 3.5%, down from 3.7%.
Although caution appears to be rising a little among employers, with new staff being taken on slowing, it’s clear a fight for talent is still on, with many companies hesitant about reducing headcount as a precaution even as customers start reining in spending and worries rise about the outlook ahead. Significant warmth is still radiating in the economy, so another 0.75% hike is expected at the next Fed meeting. Further hikes are also expected, which will take wind out of the sails of growth, but the Fed’s actions indicate its committed to sacrificing an expanding economy to rein in rampant inflation.
With all this in mind, there aren’t likely to be many chinks in the dollar armour any time soon, with the strength of the greenback continuing to cause continued inflationary pressures in other economies, as imports priced in dollars, remain more expensive.’’
