Por Isaac Cohen*
The Republican Party recent support for more government spending and lower taxes was received by a plunge in the markets, as a sign of future inflation and higher interest rates. Several indicators confirmed this perception.
The Labor Department said, last week, the producer-price index increased 0.4 percent in January, or 2.7 percent from a year earlier. Also in January, the consumer-price index rose 0.5 percent and excluding more volatile food and energy prices it rose 0.3 percent. Additionally, the unemployment rate in January remained at 4.1 percent, but hourly wages increased 2.9 percent, from a year earlier, the highest increase since 2009.
A question is how the central bank will interpret these signals, at its next meeting in Washington on March 20-21. Particularly because the preferred indicator of inflation for the Federal Reserve is the Commerce Department’s personal-consumption-expenditures price index, which has remained under the 2 percent annual inflation objective for more than five years. The new January figure for this indicator is due on March 1 and it remains to be seen if it confirms the inflationary signals of the other indicators. If that is the case, the next meeting of the Open Market Committee, for the first time under the baton of the new Federal Reserve Chairman Jerome Powell, will approve this year’s first interest rate increase.
*International analyst and consultant, former Director ECLAC Washington Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.