economy and politics

Inflation eases in the US and fuels hope that “the worst is over”

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This August 10, it was known that consumer prices in the United States rose 8.5% year-on-year in July, less than what they had increased in June. It’s a noticeable first sign of relief for Americans already accustomed to the highest inflation in 40 years. But not enough to calm the markets.

The two largest economies in the world seem to be showing signs that the worst may be over, as far as inflation is concerned, after a year of unusual price growth.

In the United States, the consumer price index accumulated an increase of 8.5% in the last 12 months until July, which shows a clear slowdown compared to the 9.1% increase in June, the highest in four decades.

And in China, producer prices rose 4.2% year-on-year in July which, while high, slowed to a 17-month year-on-year low, while final consumer prices rose less than the market expected.

The newly released data could revive the debate on whether a peak in price increases has already been reached and whether the measures that governments have taken to counteract inflation have effectively cooled economies.

They could also be, in the case of the United States, decisive for the Federal Reserve (FED), which must decide whether to continue raising its interest rates with the same aggressiveness to try to control the price boom.

The Fed has been more cautious after wrongly predicting last year that high inflation would be transitory.

Lower gasoline prices eased American pockets

After hitting record highs repeatedly in June, US gasoline prices managed to stabilize and even fall sharply in July. So did the prices of key raw materials such as wheat and copper.

According to the Department of Labor Statistics, gasoline prices fell 7.7% in July from June. But compared to last year they are still 44% higher.

Food prices increased 10.9% year-on-year and energy prices rose 33%.

Inflation in the United States is at a four-decade high.
Inflation in the United States is at a four-decade high. © France 24

While some analysts may take comfort in the fact that inflation was less high in June than in July, there is still a long way to go for a real price stabilization.

Without a doubt, an inflation of 8.5% year-on-year is better than one of 9.1%. However, the truth is that both are far from the 2% goal set by the Federal Reserve and which serves as a reference for its monetary decisions.

President Joe Biden summed it up this Wednesday as follows: the Executive’s work to contain prices “is far from over.”

With Reuters, AP and EFE

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