Inflation in the US falls to 2.1%, the lowest since 2021

Washington. Inflation in the United States fell in September to its lowest level since February 2021 in the 12-month measurement, according to the personal consumption index (PCE), the most followed by the Federal Reserve (Fed), which was published this Thursday, five days before the presidential elections.

The PCE marked 2.1 percent in the annual measurement, compared to 2.3 percent in August, close to the central bank’s target of 2 percent, a level considered healthy for the economy. In the month-to-month measurement, between August and September, prices increased 0.2 percent, slightly more than the 0.1 percent increase between July and August. The data is in line with what analysts expected.

Core inflation – which excludes the most volatile prices such as food and energy – remained stable in 12 months during September, at 2.7 percent. It also had a slight positive variation in the month-to-month measurement, going from 0.2 percent between July and August to 0.3 percent between August and September.

The other inflation index, the CPI or consumer price index, published days ago, also fell in September, registering 2.4 percent in one year at its lowest level since February 2021.

Inflation looms large in the race for the White House ahead of the Nov. 5 election between Vice President Kamala Harris and former Republican President Donald Trump.

41 percent of Americans say inflation is their main economic concern, according to a Bankrate survey published October 15. Among Republicans, the percentage rises to 56 percent, and among Democrats it falls to 28 percent.

The spike in prices since 2021, during the post-pandemic economic recovery, with Joe Biden having just arrived in government, is one of the most difficult factors for Democrats to overcome in the race for the Presidency.

A few days before the vote, the president welcomed a new moderation of price increases in the country, in a statement from the White House, in which he accused the Republicans of having “a program of increasing costs” for families. Americans.

Contrast

Across the country, small signs reading “Trump low prices, Kamala high prices” were installed in front of the homes of Republican voters.

Trump promised on Saturday, during an election rally in New York, that he would make the cost of living “affordable again in America” by cutting taxes.

Kamala Harris assured on Wednesday that she has “a very precise and detailed plan to strengthen” the economy. “Eminent economists examined my plan and indicated that it will strengthen the economy, and (they pointed out) that Donald Trump’s plan weakens it,” he said.

Fed expected to cut rates right after election

To counter inflation, the Federal Reserve, the US central bank, raised its interest rates to highest levels in more than 20 years. High rates make credit more expensive and discourage consumption and investment, thereby reducing pressures on prices.

With inflation close to the Fed’s target, the central bank shifted its focus of concern to unemployment.

The Fed has two mandates: keep inflation at bay and achieve full employment.

That is why in September it began to reduce reference interest rates, a movement that should continue at its next meeting on November 6 and 7, precisely the day after the election.

The market expects a new cut, this time by a quarter of a percentage point instead of a half, to bring rates to a range of 4.50 to 4.75 percent, according to the consensus compiled by CME Group.

“From the Fed’s point of view, this data shows enough progress on PCE prices for policymakers to continue cutting rates, even if core inflation is still a little higher.” than (the Fed) would like,” said Carl Weinberg and Rubeela Farooqi, economists at High Frequency Economics.

Data from the Commerce Department showed on Thursday that household income rose more in September than in August (0.3 percent versus 0.2 percent), thanks primarily to higher wages. Expenses, meanwhile, also grew, 0.5 percent in September compared to 0.3 percent in August.

This “strong growth,” according to Weinberg and Farooqi, shows the Fed that “aggressive (interest) rate cuts are not necessary to avoid a recession.”