US: Tight Labour Market and Still-Abundant M2 Make for an Inflationary Cocktail
267 Views, 14 Jan 2022 03:17
- CPI inflation (7%YoY) is at its highest since the Volcker era (June 1982), core CPI inflation (5.5%YoY) its highest since February 1991, driven by 12-14%YoY growth in M2 during 2H21.
- The 'disappointing' NFP still brought the unemployment rate down to 3.9% in December 2021, well below the NAIRU, resulting in a 4.7%YoY rise average hourly earnings (wages).
- We expect at least 4 hikes in the Fed Funds rate this year, taking it to 1.25% by end-year, with QE4 likely abandoned at the Jan25-26 FOMC meeting.