Has the worst of the post-Covid-19 price hike passed to the United States? Inflation rose 7.7% yoy in October, according to data released by the Labor Office, and rose 0.4 points month-over-month. This is better than economists’ expectations, who expect an increase of 7.9% and 0.6% respectively. This is the lowest figure in a year, after the peak of 9.1 points reached in June.
Above all, core inflation, excluding energy and food, is falling sharply: in one year it is 6.3% and between September and October prices increased by only 0.3 percentage points, in mid-August and September. According to Jason Furman, a Harvard economist, it is the latter figure – 3.6% higher on an annual basis – that is important. Better, the index that also excludes used and housing fell according to his calculations to 1.8%. Vehicles are particularly volatile, while the decline in homes is very slow, with only a small fraction of leases renewed each month. This figure shows that inflation, which had penetrated all sectors of the economy, is calming down. Consequently, Mr. Furman, who had been one of the few to predict, with supporting studies, that the increase would not be completed at the end of August, is delighted. “Another month or two like this and we can relax a little”he tweeted.
The markets themselves did not wait to cut the champagne. Now they expect the Fed, the Federal Reserve, which raised its key rates from zero in March to over 3.75% at its last meeting in October, to cut the time and only increase the cost of borrowing. by 0.5 points at the December meeting. As a result, Wall Street had its best session since April 2020. On Thursday, the S&P 500 index, which represents large corporations, was up 5.54%, while the technology-rich Nasdaq index jumped by some. 7.35%.
Technology is particularly sensitive to monetary policy because its companies don’t always make profits. They are therefore the first to suffer from the slowdown and increase in financial charges caused by the rise in interest rates. Since the beginning of the year, these two indices have fallen by 29% and 17%.
The bond markets are also celebrating: the yield on government bonds, which stood at 4.10%, fell sharply to 3.82% after the publication of the price index. Logically, the dollar fell, the euro jumped from $ 0.99 to $ 1.01. The mood contrasts with Jerome Powell’s press conference, which disappointed hopes for a monetary easing in early November. He also indicated that the final level of interest rates needed to reduce the price increase to 2% had increased. But with this price index, for the first time, the US has a tangible sign that probably the worst is behind them.
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