US Producer Prices Up 9.6%... "Three More Rate Hikes Next Year Possible"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] On the 15th (local time), ahead of the Federal Reserve's (Fed) monetary policy meeting results, the U.S. producer price inflation rate recorded an all-time high. As the Fed is expected to accelerate tightening to counter steep inflation, the market also anticipates that there will be three interest rate hikes next year.

On the 14th, the U.S. Department of Labor announced that the Producer Price Index (PPI) for November rose 9.6% compared to the same period last year. This increase is larger than the 8.6% rise in the previous month and exceeds the market expectation of 9.2%. The market had expected the November PPI increase to slow down, but the actual result showed a greater surge.

The core PPI, which excludes volatile food and energy prices, also rose significantly by 7.7%, showing a notable increase compared to the previous month’s 6.8%.

CNBC reported that this PPI increase is the highest on record since the statistics began being compiled.

Following last week’s Consumer Price Index (CPI) surge to 6.8%, the leading indicator PPI’s near 10% rise further increases the likelihood of the Fed accelerating the normalization of its monetary policy.

The Fed is scheduled to discuss accelerating tapering (reduction of asset purchases) during the two-day Federal Open Market Committee (FOMC) regular meeting starting today.

As Chairman Jerome Powell has indicated, the Fed is expected to complete tapering three months earlier than initially planned, by March next year, and begin preparing for full-scale interest rate hikes. According to a CNBC survey conducted on this day, experts expect the Fed to start raising the benchmark interest rate in June next year, increasing the current near-zero rate to 1.5% by the end of the following year. This implies the possibility of three rate hikes within next year alone.

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