Inflation in the US moderates again in August

Washington. Inflation in the United States moderated to 2.2 percent in the 12 months ended in August, according to the measurement of the personal consumption index (PCE) published on Friday by the Department of Commerce, good news for Joe Biden’s government a few weeks before the presidential elections.

The PCE is the index most followed by the Federal Reserve (Fed, central bank) to monitor price behavior.

August’s result compares with 2.5 percent in July. In mid-September, the US central bank began a cycle of interest rate cuts to make credit cheaper, in a context of falling rate of price increases.

The data was slightly better than expected, as analysts expected 2.3 percent, according to the MarketWatch consensus.

The price increase that Americans have been facing for several years, and that has affected many other countries in the world, is one of the main concerns of voters, who will have to choose between Democrat Kamala Harris and Republican Donald Trump. next November 5th.

“Inflation returned to 2.2 percent, a level similar to those before the pandemic, at a time when interest rates fell, thus reducing the cost of purchasing a house, a car or running a small business. company,” Biden congratulated himself in a statement.

However, core inflation, which excludes the most volatile prices such as food and energy, rose to 2.7 percent in the 12-month measurement, compared to 2.6 percent in July.

This is the first increase in core inflation “since January 2023,” highlighted John Choong, analyst at Investors Edge.

“PCE inflation moderated to 2.2 percent, close to the Fed’s 2 percent target,” but the rebound in the underlying index “shows that inflationary pressures persist, particularly in housing and services,” said Anita Wright, of Bolton James.

Another inflation index, the CPI, on which pensions are indexed, fell in August to its lowest level since February 2021, at 2.5 percent annually.

Consumer spending increases

Consumer spending – which accounts for more than two-thirds of US economic activity – rose 0.2 percent last month, following an unrevised 0.5 percent increase in July, the Commerce Department’s Bureau of Economic Analysis reported Friday. . Economists polled by Reuters estimated an increase of 0.3 percent.

Consumer spending continues to be supported by still-solid wage gains, even though the labor market has slowed considerably.

In addition, consumer confidence in the US economy improved in September, the University of Michigan announced this Friday. Americans are “fully aware that inflation continued to decline,” said the director of the university survey, Joanne Hsu.

But “many consumers continue to declare that their expectations depend on the results of the upcoming elections,” he said.

The future of rates

The Fed proceeded 10 days ago with its first rate cut since 2020, and it was for a significant reduction, of half a percentage point. Its president, Jerome Powell, noted that this is a “beginning.”

The central bank, which has a dual mandate of keeping inflation low and full employment, is now focused on ensuring the labor market does not deteriorate.

The central bank will meet just after the elections, on November 6 and 7.

(With information from Reuters)