- US inflation moderates: 3.1%
- Market reacts negatively
- Core inflation remains unchanged
In the United States, price increases moderated last month, but not to the extent that was anticipated, as higher housing and food costs countered a decrease in petrol prices.
The Labour Department reported 3.1% inflation, down from 3.4% a month earlier.
Numerous analysts had anticipated a 2.9% decline in inflation.
The most recent economic report indicates that authorities have not achieved complete control over inflation.
After the report, financial markets in the United States opened lower, dispelling any remaining optimism that the US central bank would be persuaded to reduce interest rates early this year due to progress in containing the issue.
“Everything appears to be proceeding more rapidly than anticipated,” said Neil Birrell, chief investment officer at Premier Miton Investors. “Although we do not yet need to be concerned about a resurgence in inflation, we are also not yet out of the doldrums.”
In the United States, inflation, which measures the rate of price increases, skyrocketed in 2021 due to a thriving post-pandemic economy that caused supply shortages and robust demand, which prompted many businesses to raise prices.
In June 2022, it surpassed 9.1%, as crude prices increased in response to the conflict in Ukraine.
A number of supply-related concerns have been resolved since 2022. This is in part due to the Federal Reserve’s announcement of a steep increase in borrowing costs.
Nonetheless, price increases have persisted, particularly for services.
The repeated price hikes have hurt salaries and fueled voter anger before the November presidential election.
“With the exception of my salary payments, everything is getting more expensive,” said Pennsylvania grocery worker Francis Leonardo, 53, who announced that she would be supporting Donald Trump in November.
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On Tuesday, the Labour Department stated that 6% year-over-year house price gains drove inflation in the previous month.
A smaller 1.2% increase was observed in the cost of groceries, as the price of certain commodities, including eggs, decreased. However, restaurant costs had risen 5.1% since January 2023.
Automobile insurance premiums increased by a substantial 20.5% year-over-year, whereas personal care expenses rose by 5.3%.
Core inflation remained unchanged at 3.9% since December. Energy and food prices are volatile and not trustworthy forecasters of broader patterns, thus our method ignores them.
Federated Hermes Limited’s head of US equities, Mark Sherlock, stated that the information contained in Tuesday’s report would “certainly extend the timeline for the first rate cut.”
He stated that the Federal Reserve has always maintained its reliance on data and is reportedly eager to avoid the errors of the 1970s (when rates were reduced prematurely and the United States economy endured a second, more severe round of inflation).
