Prices fell by 0.1% between November and December in the United States, due to the 4.5% drop in energy prices. And over one year, inflation fell to 6.5% at the end of 2022, according to figures published Thursday, January 12 by the US Department of Labor. This statistic, in line with expectations, confirms the decline in inflation, which was 7.1% in November and had reached a maximum of 9.1% in June 2022, the worst figure in forty years. Excluding food and energy, prices rose 5.7%, down 0.4 points in one month. “For the first time since the return of inflation, underlying inflation in the euro zone has exceeded that of the United States”rejoices Harvard economist Jason Furman.
Lower federal deficit
The worst is therefore over, while wage increases are also settling. The decline in inflation in 2022 has three main causes: the reduction of “bottlenecks” (raw materials, labour, microprocessors, freight) which were hampering economic recovery; the monetary policy of the Fed, which resolutely raised its rates in 2022 from zero to 4.25%; the restrictive fiscal policy, which, with the end of the anti-Covid plans, saw the federal deficit increase from 2,600 to 1,400 billion dollars between 2021 and 2022.
Except that the political games risk disrupting the completion of the work, a return to inflation of around 2% while avoiding a recession. The first risk is the attacks on the Fed, which should, according to market expectations, be satisfied with a rate hike limited to 0.25 points at the end of its next meeting, on 1er february.
“Inflation has been slowing for six months. The Fed needs to heed this data and not throw the economy over the edge with more extreme interest rate hikes. — Elizabeth Warren, Senator from Massachusetts
The challenge, for its president Jerome Powell, is to maintain his credibility: the financial markets do not believe in his determination and are lowering rates and raising equities as soon as they have the possibility, believing that the central bank will have to do backtrack to avoid a recession. Many also criticize the institution for going too far. On the left, Massachusetts Senator Elizabeth Warren asks for a break: “Inflation has been slowing for six months, giving families more room to manoeuvre. The Fed needs to heed this data and not throw the economy over the edge with more extreme interest rate hikes. »
You have 59.98% of this article left to read. The following is for subscribers only.