Supply issues easing, Fed rate hike expected in September: S&P

ANKARA

Supply constraints are easing, but the Federal Reserve's first rate hike is expected in September next year amid record-high inflation, S&P Global Ratings said Monday.

"Some supply-side bottlenecks are starting to show signs of easing, suggesting the US economy may begin to see price peaks alleviate in 2022," the global rating agency said in a statement.

Although bottlenecks remain across the supply chain, there are some signs of alleviation in construction, manufacturing and global transportation network, it added.

Consumer prices in the US hit their highest level in 31 years, however, remain an issue for American economy, and the Fed has not yet provided an answer to the issue.

The S&P said it now expects the central bank to make its first interest rate increase in September 2022, sooner than its previous forecast of December 2022.

The agency noted that markets are pricing the Fed's first rate hike at the bank's June 2022 meeting, and they anticipate more hikes priced in later for 2022.

"The recent surge in the growth rate of consumer prices to a 30-year high sparked calls from the market for the Federal Reserve to move much faster on raising rates, with markets pricing in the first rate hike at its June 2022 meeting, with more priced in later in the year. Indeed, the surge in inflation likely explains the recent drop in consumer confidence readings," it explained.

US consumer sentiment declined to its lowest level in a decade with rising inflation worries, according to data released by the University of Michigan on Friday.

Consumer price index (CPI) in the US rose 6.2% in October, the largest 12-month increase since November 1990, according to the Labor Department on Wednesday. Core CPI jumped 4.6% year-on-year, its largest 12-month rise since August 1991.