Inflation in the US breathes in October, but remains the highest in four decades

First modification: 11/10/2022 – 16:58

Many on Wall Street expected US inflation to slow in October compared to the ninth month of the year, but few were betting that it would be well below 8%.

The result, 7.7% per year, surprised the market and fueled hopes that the Federal Reserve has found a reason to relax its campaign of constantly increasing interest rates to curb increases in the price of the family basket.

According to the Department of Labor, the increase in prices in October, compared to September, was 0.4%, below what analysts consulted by Reuters had expected.

It is the first time since February of this year that the annual increase in the CPI was below 8%, although the rate of increase remains only comparable to that of four decades ago and is far from the 2% target.

The financial market pins its hopes on lower interest rates

The annual CPI in the United States peaked at 9.1% in June, the biggest gain since November 1981, and the Federal Reserve responded by aggressively raising interest rates to curb consumption and cool runaway prices.

Although inflation has been slowing, Central Bank President Jerome Powell has sent signals that rising borrowing costs are far from over.

This new data, the market expects, could serve as an incentive for the FED to moderate these increases, which have, among others, mortgage loan rates at historically high levels.

At the height of the electoral season in the United States, Republican opponents have blamed Joe Biden for the price spike, due to the explosion in consumer spending that fueled the millionaire federal aid delivered to minimize the impact of the pandemic.

One of the basic principles of economics says that the higher the demand, the higher the prices. And billions of dollars in the pockets of citizens could contribute to that rebound.

The president, in turn, defends himself by blaming the acceleration of inflation on the shortage of supplies and labor after the pandemic and the Russian war in Ukraine, that is, an inflation that comes more from the supply side than Of demand.

So far this year, the Fed has raised its benchmark interest rate six times, many of them considerably, raising the risk that more expensive mortgages, cars and other goods will send the world’s largest economy into collapse. recession.

With Reuters and AP