Recently, Yemeni rebels have frequently attacked merchant ships in the Red Sea, which has caused many shipping giants such as Maersk to choose to detour to the Cape of Good Hope, and freight rates have risen, and all walks of life are also worried that inflation may rekindle. However, analysts point out that the correlation between freight rates and the consumer price index (CPI) is actually weak.
According to Marketwatch, Tslomgard analyst Dario Perkins pointed out that the correlation between rising freight rates and rising consumer price indices is relatively weak, and the impact on developed markets such as the United States is particularly small. The cost of freight as a percentage of gross domestic product (GDP) in the United States is also extremely low compared to other developed and developing economies.
Perkins also pointed out that in order to calculate the impact of freight rate increases on inflation, it is necessary to first calculate the proportion of imports to CPI, and then calculate the proportion of freight costs to imports. The calculations suggest that small island states are likely to face large price shocks, while the US CPI may increase only slightly by 04% to 07%, the impact on the core CPI is expected to be smaller, about 02%。
The Red Sea crisis is not the only variable driving up inflation. Christopher Smart, manager of the Arbroath Group, pointed out that the phenomenon of the Holy Child has also affected the Panama Canal, which has caused the water level to remain too low and limit the volume of traffic. However, even the final price change caused by the freight rate** will not be too large.
White House Special Envoy Amos Hochstein recently pointed out in an exclusive interview that the Red Sea turmoil does lead to costs**, but the impact on inflation is relatively mild.
The U.S. Department of Commerce announced on the 26th that the core personal consumption expenditures (PCE) price index in the United States increased by 2 percent annually in December last year after excluding volatile food and energy9%, the lowest increase in nearly three years.
Markets will also be watching closely at the Federal Open Market Committee (FOMC) meeting on the 30-31st. The authorities are widely expected to keep interest rates at 525-5.The 50% range is unchanged and watch for rate cut signals.
Header image**: Unsplash).