Prices are rising more strongly again
“Inflation jump” in the USA shows difficult path
September 13, 2023, 5:09 p.m
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Inflation in the USA is increasing for the second month in a row. Experts still expect that the Fed will forgo raising interest rates in September. However, the data also shows that the path to the narrowest inflation values is a long one.
In the USA, consumer prices rose for the second month in a row. In August they increased by 3.7 percent over the year, after 3.2 percent in July and 3.0 percent in June, as the Labor Department in Washington announced. Experts had expected a slightly smaller increase. The US Federal Reserve Bank wants to curb inflation and make it dependent on the data situation whether it will tighten interest rates further on September 20th or not. “It looks like there will be a break in interest rates, even if the inflation battle has not yet been won,” said analyst Bastian Hepperle from Hauck Aufhäuser Lamp Privatbank. The reason for the “inflation jump” is once again energy prices and a statistical effect.
When it comes to inflation, the Federal Reserve’s monetary authorities also pay attention to the so-called core rate, which excludes the volatile prices for energy and food. As economists expected, this rate fell from 4.7 to 4.3 percent over the month. The indicator allows conclusions to be drawn about the fundamental inflation trends and is therefore an important benchmark for the Fed’s monetary policy course.
“Currency guardians can safely take a break”
“The path to inflation remains bumpy, but it will continue to decline,” said Hepperle. “As the core rate declines again, the pressure on the Fed to raise interest rates is decreasing.” Helaba expert Ulrich Wortberg also sees that inflation pressure is likely to ease again in the future. “The risk that inflation will be a little more stubborn in the coming months than initially expected has increased,” emphasized Wortberg. “Therefore, interest rate expectations are likely to increase” and bankers are unlikely to sit back and relax.
The recently increased unemployment rate and the ebbing boom in the job market provide arguments for supporters of an interest rate break. “In addition to the declining trend in the core inflation rate, the more balanced US labor market is also likely to play a central role in the Fed staying quiet,” explained chief economist Thomas Gitzel from VP Bank. The number of vacancies is still high by historical standards, but there are no longer quite as many jobs as there were a few months ago. “The US monetary authorities can safely take a break in September after the significant interest rate hikes they have already carried out.”
The Fed also wants to avoid strangling the economy by adopting too strict a line. Fed Director Christopher Waller recently said that it looks like the Fed will be able to achieve a so-called soft landing for the US economy, meaning that a deep recession can be avoided. Prices rose by 0.6 percent from July to August, the highest month-on-month increase since June 2022. The dollar gained against the euro according to the data.