Chart of the Week: Soaring US inflation increases pressure on Fed

Last week brought further evidence of soaring US inflation. The Personal Consumption Expenditures (PCE) deflator rose from 4.4% on a year-on-year basis to 5% in October — its highest level since November 1990. Core PCE inflation, which excludes food and energy items, rose four-tenths to 4.1% — its highest since January 1991. This is well in excess of the Federal Reserve’s 2% target. Adding to risks on the inflation front, producer price inflation remains very elevated and there is further evidence of a red-hot labour market. In the latest week, initial jobless claims fell to their lowest since 1969, a time when the US population was around 60% of its current size. The Federal Reserve recently began to taper its asset purchase programme (which is due to end around June next year), however, there is now a risk that they may have to expedite this process.

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