Stocks in Europe were mixed.
Treasury yields were mixed in the bond market. The yield on the 10-year Treasury, which influences mortgage rates, rose to 5.15 per cent from 5.10 per cent late Thursday.
The yield on the two-year Treasury rose to 4.87 per cent from 4.86 per cent late Thursday. It closely tracks expectations for action from the Federal Reserve, which is expected to raise its benchmark interest rate at its December meeting in an effort to cool stubbornly hot inflation.
A report on Friday showed that wholesale inflation cooled a bit last month, but remains very high. The report measures inflation experienced by businesses, before it can reach consumers. Inflation at the consumer level remains stubbornly high at well above 3 per cent. That’s also much higher than the Fed’s preferred target of 2 per cent.
Rising energy prices because of the US war with Iran have been fuelling inflation. Household budgets are getting squeezed directly by higher gasoline costs, but pricier gas and diesel raise costs for anything that is shipped. Prices for everything from food to clothing have been rising.
The latest wholesale inflation report also shows food prices and other costs gaining ground, despite some easing for energy costs.
“That suggests inflation is working its way into the broader economy rather than remaining concentrated in the original areas of price pressure,” said Chris Osmond, chief investment officer for Fifth Third Wealth Advisors, in a research note. “If that continues, it becomes much harder for the Fed to simply look through inflation as temporary.”
The central bank held rates steady at its last meeting, following a previous rate hike. The latest hot updates on inflation have prompted economists to overwhelmingly expect a rate hike at the upcoming December meeting, with another hike likely to follow in January.
Rate hikes by the Fed can cool inflation, but that makes borrowing more expensive and can slow economic growth.
