US Federal Reserve Policy: reasons for high inflation and CPI growth in 4,2%

Expert opinions

In April, the U.S. consumer price index rose by 4,2%. This is the maximum growth in recent 12 years. Since March last year FED The US pursues a loose monetary policy: keeps interest rates low and increases the money supply, buying up long-term bonds. Such actions of the regulator stimulate the growth of the stock market, but increased liquidity at some point may lead to acceleration of inflation and the early cancellation of stimulus measures.

Portal CNBC polled 30 market strategists from the US and Asia and learned their opinion about inflation - one of the key indicators, monitored by the Fed. Experts have suggested, When will the regulator announce monetary tightening?, and assessed the possible reaction of the markets.

21 respondent from 30 Said, that inflation in the US is temporary, and high growth rates can be explained by the low base effect. Brent crude has doubled in price in a year, as in the second quarter 2020 demand and prices for raw materials fell sharply.

Another temporary reason is the increased cost of production.. Due to quarantine and various restrictions, manufacturers have increased their costs, and then put it in the cost of goods. Aging of the economically active population, production automation, which is holding back wage growth, and high levels of consumer debt will slow down inflation in the future, according to experts.

The remaining nine respondents consider, that inflation will continue to rise. “If the economy recovers, and the Fed expects the unemployment rate to fall to 4,5% by the end 2021 of the year, why continue the crisis monetary policy? Why is the Fed still buying assets on 120 billion dollars a month?' said one of the experts.

15 respondents from 30 suggest, that the Fed will announce the end of the stimulus program in the near future: at the Jackson Hole symposium in August or at the meeting in September. Tighter Fed policy may lead to correction in the stock market.

19 respondents expect S to fall&P 500 no more than 10%, as in May - June 2013 of the year. Then the broad market index fell by 8%. Six strategists predict a decline of 10-15%, and two - by 15-20%.

Experts disagree on when to raise interest rates. Ten of them are waiting for promotion in the second half 2023 of the year, six in the first half 2023 of the year, nine - in the second half 2022 of the year, and three in the first half 2022 of the year.

US consumer price index