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Despite having fallen compared to the previous month, inflation remains high for the United States Central Bank, which has increased interest rates consecutively to cool down the economy and expected a cost of living one tenth less (8.1 %). The financial markets had been waiting for the data for days and now investors are waiting for the next meeting of the Federal Reserve (FED) scheduled for November.
The Consumer Price Index (CPI), a reference to measure inflation, stood at 8.2% in September compared to the same month of the previous year. The data turned out to be the third inflationary decrease recorded by the United States in a row; however, it is one tenth more than what the FED had expected.
Compared to August, the CPI rose 0.4%, governed by housing prices, food and medical expenses of Americans. Although after excluding volatile food and fuel price data, the rate stood at 6.6%.
“The general index for food continued to rise, 0.8% in the month, and eating at home rose 0.7%,” are other data that the United States Department of Labor’s Bureau of Statistics said in a statement.
A challenge for the FED and the Biden Administration
With the announcement, the markets reacted fearfully, as their eyes focused on the fact that the data, despite being lower than the previous month, is not what was expected and was described as “too high” by several US leaders.
As of Wednesday, October 12, Asian stock markets closed based on rumors of high inflation and Wall Street opened with slight losses. Purchase decisions that investors made thinking about the coming weeks, as it is feared that the FED will increase interest rates once again.
“Our policies haven’t really affected as much as they need to get us to a better place,” Atlanta Fed President Raphael Bostic told Reuters on Wednesday ahead of the higher-than-expected inflation report.
However, the tightening of monetary policies has not reflected the expected results and the central bank has already accumulated five increases in reference rates this year, including three drastic increases of 0.75%, all under the framework of a plan focused on making loans, make them less affordable, reduce the purchasing power of consumers, and thus prevent excessive consumption.
“If we don’t see signs that inflation is coming down, my view remains that sizable increases in the target range for the fed funds rate should remain on the table,” Fed Governor Michelle Bowman told Reuters before Of the report.
With the announcement, President Joe Biden recalled his priority of combating high inflation and his detractors have already begun to point to the Democratic government ahead of the midterm elections. The president acknowledged that the CPI for September is not positive.
Meanwhile, Congressional Republicans’ number one priority is repealing the Inflation Reduction Act. They’ve said it themselves.
And if they get their way, everyday costs will go up – not down. That’s exactly the wrong thing to do.
— President Biden (@POTUS) October 13, 2022
“But even with this progress, prices are still too high. Fighting global inflation that is affecting countries around the world and working families here at home is my top priority,” Biden said.
With Reuters and AP
