Inflation in the United States continues its moderate downward path and in September it fell one tenth, to 2.4% year-on-year, a figure that reduces the rush of the Federal Reserve (Fed) to lower interest rates and gives encouragement to the Democratic candidate Kamala Harris, with less than a month left until the presidential elections.
Although the drop is only one tenth and is less than what economists estimated, it rules out that inflation has stagnated on its way towards the desired 2% since this is the sixth consecutive month that the consumer price index has fallen ( CPI).
The figure of 2.4% year-on-year is the lowest figure since February 2021 and is the first known after the first interest rate reduction announced by the Federal Reserve three weeks ago.
The United States Bureau of Labor Statistics (BLS) reported this Thursday that in monthly terms prices increased two tenths in September compared to August.
The housing index increased 0.2% in September (4.9% year-on-year) and the food index increased 0.4% (2.3% year-on-year). Together these two indices contributed more than 75% of the monthly price increase of all items.
The energy index fell 1.9% during September and in the last twelve months it has decreased 6.8%.
Core inflation – which strips out the most volatile components such as fresh food and energy – rose 0.3% in September. This is one of the indicators that the Fed observes most closely when making its decisions on monetary policy and in year-on-year terms it stood at 3.3%, one tenth more than in August.
Possible slower rate cuts
On September 18, the Fed began a cycle of rate cuts with an aggressive reduction of half a point instead of a quarter, although its president, Jerome Powell, ruled out that this was going to be the usual rate of falls.
«Decisions will be made, meeting after meeting, until we reach a place that is most appropriate given where we are now and where we hope to be, and that process will take place over time (…). “There is nothing to suggest that the committee is in a rush to do this,” he said.
According to financial firm eToro, today’s CPI report “will dampen enthusiasm around rate cuts next month.”
This data, added to that of unemployment, “have practically ruled out the possibility of another 50 basis point cut next month, while some could argue that it rules out any type of rate cut in November.”
Last week the first employment data was released after the Fed’s decision and the net creation of new jobs rose that month to 254,000, about 95,000 more than those generated in August, a figure much higher than expected by the economists.
Rates remained unchanged since July 2023 and now the reference rate is in a range of 4.75% to 5%, after the first decrease in the last four and a half years, after eleven increases with the aim of lowering inflation at 2%.
In the minutes of this meeting published on Wednesday, members of the Federal Open Market Committee (FOMC) noted that the assessments will take into account a wide range of information, including readings on labor market conditions, pressures inflationary and financial and international events.
The Fed’s next interest rate meeting will take place on Wednesday and Thursday, November 6 and 7, one day after the US presidential election on November 5.
Alas a Harris
The drop in inflation for six months is good news for the Government of Joe Biden and for the Democratic candidate for the elections, Vice President Kamala Harris.
With less than a month left before Americans go to the polls, the economy continues to be, according to polls, one of the first motivations to see who they will vote for.
In a statement, National Economic Advisor Lael Brainard noted that 2.4% is the same inflation rate the United States had before the coronavirus pandemic.
«Inflation is back to pre-pandemic levels, 16 million jobs have been created, interest rates are lower and unemployment is low. “Our economy has grown 3.2% annually during the Biden-Harris administration, more than during the previous administration,” he noted. EFE
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