This is US Inflation Data That Underlies the Fed's Interest Rate Hike

The U.S. Federal Reserve (The Fed) is expected to soon raise its benchmark interest rate, currently at 0.25%. The steadily rising inflation rate is the primary reason for the Fed's imminent interest rate hike.

Inflation has been driven by rising prices of goods in the United States over the past year, particularly food prices and global oil prices, which have increased along with the improvement in global economic conditions.

According to data from the U.S. Bureau of Labor Statistics, the U.S. experienced inflation of 0.6% in January 2022 compared to the previous month (month-to-month/M-to-M). This includes food inflation of 0.9% and energy inflation of 0.9%.

Compared to January 2021, U.S. inflation in January 2022 was 7.5% (year-on-year/YoY), its highest level ever. This includes food inflation of 7% (YoY), with food at home inflation reaching 7.4% (YoY) and food away from home inflation at 6.4% (YoY).

Energy inflation in January was 27% (YoY), with energy commodity inflation at 39.9%, gasoline inflation at 40% (YoY), electricity inflation at 10.37% (YoY), and pipeline gas inflation at 23.9% (YoY). Used car and truck inflation reached 40.5% (YoY), while new vehicle inflation was 12.2% (YoY).

To curb this high inflation, the Fed is expected to aggressively raise its benchmark interest rate. This will likely strengthen the U.S. dollar due to the rising interest rates. This typically leads to the depreciation of global currencies, including the Indonesian Rupiah.

Federal Reserve Governor Michelle Bowman stated that the U.S. central bank may raise interest rates in March. One of the reasons is the rising inflation rate, which reached 7.5%, the highest in four decades.

“I’m still carefully watching the data to decide on the appropriate increase in March,” she said while speaking at the American Bankers Association conference on Monday, February 23, 2022.