Agency: The Fed is more worried about high inflation forecasts than stagflation risks

2022-08-26 0 By

Xinhua Finance Shanghai, March 14 (reporter Du Kang) at present, the global focus on the Federal Reserve will be held on the 15th monetary policy meeting.Ubs said that while the commodity rally was likely to slow economic growth, the Fed was likely to keep monetary policy tight “as inflation expectations have now reached levels that are uncomfortable for the central bank”.Us consumer prices rose 7.9 per cent in February from a year earlier and inflation expectations for this year have risen to 5.4 per cent, the highest since 1981.Separately, the University of Michigan’s Consumer sentiment index, released Friday, fell to 59.7 in March from 62.8 the previous month and was weaker than expected.Ubs says the “consumer confidence index” is weaker than the “misery index”.While inflation has pushed up the misery index, a low unemployment rate of 3.8 per cent keeps it close to its long-term average.And consumer confidence is far more sensitive to inflation than to the Labour market.Regarding the “stagflation” view in the market recently, UBS believes that the current inflation is undoubtedly high, but it is not “stagflation”.On the downside risks of higher interest rates, UBS said the Fed has said in recent days that it will “cautiously raise interest rates” with the goal of cooling inflation without disrupting the economic expansion.Further dollar appreciation is expected, UBS said.The dollar index (DXY) is up nearly 2.5% year-to-date.