Has the worst of the post-Covid-19 price rise passed in the United States? Inflation rose 7.7% year on year in October, according to figures released by the Labor Office, and rose 0.4 points month on month. This is better than the expectations of economists, who forecast an increase of 7.9% and 0.6% respectively. This is the lowest figure for a year, after the peak of 9.1 points reached in June.
Above all, underlying inflation, excluding energy and food, is falling dramatically: over one year, it is 6.3%, and between September and October, prices only increased by 0.3% point, at half the rate of August and September. According to Jason Furman, an economist at Harvard, it is this last figure – 3.6% increase on an annual basis – which is important. Better, the index which also excludes used vehicles and housing fell according to his calculations to 1.8%. Vehicles are particularly volatile, while the decline in housing is very slow, with only a small portion of leases being renewed each month. This figure shows that inflation, which had penetrated all parts of the economy, is calming down. As a result, Mr. Furman, who had been one of the few to predict, with supporting studies, that the increase was not complete at the end of August, is delighted. “One or two more months like this and we can relax a bit”he tweeted.
The markets, themselves, did not wait to saber the champagne. They now expect the Fed, the Federal Reserve, which raised its key rates from zero in March to more than 3.75% at its last meeting in October, to reduce the tempo and only increase the cost of money. than 0.5 points at its December meeting. As a result, Wall Street had its best session since April 2020. On Thursday, the S&P 500 index, which represents large companies, soared 5.54%, while the technology-rich Nasdaq index jumped by 7.35%.
Tech is particularly sensitive to monetary policy because its companies do not always make a profit. They are therefore the first to be hit by the slowdown and the rise in financial costs caused by the rise in interest rates. Since the start of the year, these two indices have fallen by 29% and 17%.
The bond markets were also celebrating: the yield on government bonds, which was 4.10%, fell sharply after the publication of the price index, to 3.82%. Logically, the dollar fell, the euro jumping from 0.99 to 1.01 dollar. The state of mind contrasts with Jerome Powell’s press conference, which had dashed hopes of an easing of monetary policy in early November. He had even indicated that the final level of interest rates necessary to bring down the rise in prices to 2% had risen. But with this price index, for the first time, the United States has a tangible sign that the worst is probably behind them.
You have 41.92% of this article left to read. The following is for subscribers only.