“US inflation at a 2-year low but remains a big concern for the economy and Biden’s reelection – Analysis”

Now at its lowest level for two years, inflation slowed slightly in April in the United States, but remains very high and is even accelerating in places, at a time when the American central bank is considering stopping raising its rates.

Consumer prices rose 4.9% year on year in April, compared to 5.0% in March, according to the CPI index published on Wednesday by the Labor Department, and on which pensions are indexed.

This is better than expected, since analysts expected prices to rise identical to last month, according to MarketWatch consensus.

But, over one month only, inflation accelerated again, as expected by analysts, to 0.4% against 0.1% in March.

Housing, second-hand cars and gasoline at the pump still experiencing strong increases, details the Department of Labor in its press release.

This is bad news for President Joe Biden, who is seeking a second term in 2024. He is currently battling Republican opposition to try to find a deal and raise the debt ceiling, in order to avoid a debt default. United States, the consequences of which could be catastrophic for the world economy.

These figures will surely weigh heavily on the balance of the US central bank (Fed), which plans to pause rate hikes, at its next meeting in a month.

A further rise in rates would further complicate and increase the cost of access to credit for consumers. Especially since the recent banking crisis has made banks hesitant to grant loans to households and businesses.

‘Generalized’ inflation

Inflation, which had nevertheless slowed in recent months in the United States, has certainly fallen by almost half since last summer. But it is still far too high.

A governor of the Fed, Lisa Cook, had even warned, at the end of April, of inflation “generalized in the economy” in the United States.

The heavy task of bringing inflation back on track falls to the Fed. And its leaders constantly remind us of the serious consequences for the economy as a whole of a sharp and persistent rise in prices.

“High inflation is harder on those who can least afford to pay higher prices for food, housing and transportation,” John Williams, chairman of the Fed’s New York branch, said on Tuesday. .

The institution’s latest action: a quarter-point rate hike on May 3, at the end of its last meeting, in the hope of curbing the American consumption frenzy a little, and thus bringing back prices rise to the level targeted by the Fed.

The recent banking crisis came to provide unexpected support to the central bank by restricting access to credit, which acts as a rate hike.

The Fed wants to bring inflation down to 2.00% per year, a level considered healthy for the economy. Instead of the CPI index, it favors another measure of inflation, the PCE index, whose data for April will be published at the end of May. According to him, inflation had slowed in March to 4.2% over one year, against 5.1% the previous month.

US growth slowed sharply in the first quarter, with gross domestic product up 1.1% at an annualized rate, compared to 2.6% in the fourth quarter of 2022.

And on the job side, the ball remains in the workers’ court, although employers have regained some leeway after more than two years of labor shortages.

While the labor market is expected to slow down, going hand in hand with the economic slowdown, 235,000 jobs were still created in April, much more than expected, and the unemployment rate fell to 3.4 %. Wages continued to rise, although a little more slowly.

/ATS