US interest rates: why inflation just won’t fall and what it means for the Federal Reserve and markets

triggered a sell-off in bond markets, pushing the yield on benchmark US 10-year bonds to 4.3 per cent, the highest level this month.

Fed chairman Jerome Powell. Price rises and cost increases have left markets concerned that central banks will rethink plans to cut rates this year.The PPI’s steep increase – double what economists had expected – largely reflected a 4.4 per cent surge in energy prices, which contributed to a worsening of goods inflation.which rose 0.4 per cent in February, faster than January’s 0.3 per cent pace, and was 3.2 per cent higher than a year ago.

But Fed chairman Jerome Powell is cautious; he’s emphasised that the central bank wants to be confident inflation is headed back to its 2 per cent target before cutting rates. There’s no doubt that US companies have enjoyed a huge boost in profits during the pandemic-era disruptions, with profit margins jumping to 17 per cent in the April-June 2022 from 13.4 per cent in late 2019.As the US economy emerged from COVID-19 shutdowns, companies struggled to meet booming demand at a time when they were facing widespread shortages.

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