Daily Brief: With US Inflation Hitting A 39-Year High, The Fed Has Got Some Decisions To Make

Daily Brief: With US Inflation Hitting A 39-Year High, The Fed Has Got Some Decisions To Make

about 2 years ago3 mins

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Data out on Friday showed that US consumer prices rose at their fastest rate in nearly 40 years last month, but the Federal Reserve might want a minute to think twice about its next step.

What does this mean?

American consumer prices just won’t settle down: the dastardly duo of supply shortages and booming demand meant prices rose 6.8% last month compared to the same time last year. That’s the fastest annual rise since 1982, and a big jump from October’s 6.2% increase. And sure, a good chunk of that was due to rising food and gasoline prices – they’re up 6% and 58% respectively. But there’s more to it: prices were up across the board, with clothing, used cars, and housing rising 5%, 31%, and 4% respectively versus last year. That’s partly why core inflation – which strips out the typically more unstable food and energy prices – rose by 4.9% compared to the year before, and reached a 30-year high.

US inflation

Why should I care?

The bigger picture: The Fed’s got a decision to make.

Investors are expecting the Federal Reserve (the Fed) to accelerate the wind down of its bond buying program at its final meeting of the year next week. While that could cool down rising consumer prices, there’s a snag: the latest jobs report for November showed a weakening jobs market. And if the Fed follows through with raising rates, it could risk hurting that fragile market – and the wider economic recovery – even further.

Zooming out: ...And so does the Bank of England.

The UK economy isn’t feeling too hot, either: data out on Friday showed it grew by a worse-than-expected 0.1% in October compared to the month before. That’s a sharp fall from September’s 0.6% rise, and that was before Omicron emerged. And that might make the Bank of England think twice about raising interest rates, which would make borrowing more expensive and risk further denting economic growth.

UK economy

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Software Giant Oracle Reported Better-Than-Expected Results

Oracle image

Oracle reported better-than-expected results late last week, and the software giant’s got businesses to thank.

What does this mean?

Companies around the world are increasingly turning to cloud computing solutions to help with day-to-day activities like accounting – and Oracle’s not complaining. The software giant makes two cloud-based planning products, among other things, and they’ve been in high demand: sales for its Fusion and NetSuite products were up 35% and 29% respectively last quarter compared to the same time last year. That’s partly why its total cloud sales – including selling software solutions and infrastructure like data centres – were up by 22% last quarter. And that helped grow overall sales by a better-than-expected 6% last quarter compared to the same time last year.

Oracle revenue
Source: Seeking Alpha

Why should I care?

For markets: Oracle’s got rivals to catch.

That’s nothing new, mind you: Oracle’s sales have now grown for six quarters in a row, which might explain why its shares were up 39% this year before the results – far higher than the US stock market’s 26%. But don’t get carried away: that’s still far behind cloud rivals Microsoft and Google’s parent company Alphabet – they’re up 53% and 71% respectively. This might help though: Oracle’s upped its share buyback program by $10 billion – which should reduce their supply and push up their price – and delighted investors sent its shares up 10% after the news.

Oracle stock
Source: Google Finance

Zooming out: The Oracle of Omaha strikes again.

There’s another Oracle at play: Brazilian fintech Nubank is backed by SoftBank and Warren Buffet – a.k.a. the Oracle of Omaha – and its shares jumped 15% when it listed on the US stock market late last week. Not only was it the fifth largest US listing this year, it also earned Nubank the title of Latin America’s most valuable financial company. And it’s not stopping there: the digital lender’s planning to use the $2.6 billion it raised to expand into new markets like Mexico and Colombia.

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