Strong Employment and Soaring Inflation... Will the US Interest Rate Hike Schedule Accelerate? (Update)

Weekly New Unemployed Below 200,000 for the First Time Since COVID-19
Lowest in 52 Years
Inflation Indicator Monitored by Fed Surpasses 4%
US Monetary Policy Normalization Schedule Expected to Change

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The number of weekly new unemployment claims in the United States fell below 200,000 for the first time since the COVID-19 pandemic. The core Personal Consumption Expenditures (PCE) price index, which the U.S. Federal Reserve (Fed) closely monitors for monetary policy decisions, surged 4.1% compared to a year ago.

With both employment and inflation continuing to rise, expectations are growing that the Fed's tightening schedule may be accelerated.

The U.S. Department of Labor announced on the 24th (local time) that new unemployment claims for the week of November 14?20 totaled 199,000.

The number of new unemployment claims decreased by 71,000 from the previous week. This decline was also notable compared to the Dow Jones consensus market estimate of 260,000.

The Department of Labor explained that this level of new unemployment claims is the lowest in 52 years since November 15, 1969, when it recorded 197,000.

Inflation also continued its high run. The PCE for October, released on the same day, rose 4.1% compared to the same period last year, matching market expectations.

The core PCE increased even more compared to the 3.7% rise in September. The core PCE has maintained a growth rate in the 3% range this year but finally entered the 4% range in October.

This level is more than double the Fed's inflation target of 2%. Although the Fed tolerates temporary inflation above 2% through its average inflation targeting framework, this indicates that the Fed's threshold is approaching.

The PCE including fuel and food rose by 5%. The previous month's PCE growth rate was 4.4%. MarketWatch reported that the PCE reached its highest level in 31 years.

The preliminary GDP growth rate for the third quarter was 2.1%. Although this was lower than the market expectation of 2.2%, it was an upward revision from the earlier flash estimate of 2.0%.

Durable goods orders fell by 0.5%, missing the market expectation of a 0.2% increase.

CNBC forecasted that the decline in new unemployment claims could lead to changes in the Federal Reserve's accommodative monetary policy despite improvements in employment.

With Jerome Powell, whose reappointment has been confirmed, emphasizing inflation control, if employment recovery accelerates, early completion of asset purchase tapering and preemptive interest rate hikes cannot be ruled out.

Following the announcement of new unemployment claims, the yield on the U.S. 10-year Treasury bond extended its rise to 1.68%.

The minutes of the Federal Open Market Committee (FOMC) meeting, to be released later that afternoon, are expected to provide hints regarding tapering and interest rate hikes.

CME FedWatch estimates about a 61% probability that the Fed will raise interest rates three times next year.

This content was produced with the assistance of AI translation services.