THE consumer prices in the world’s largest economy have been higher than expected in September, suggesting that the Federal Reserve will keep interest rates high for some time.
In particular, US consumer prices were slightly above consensus, both on a monthly and annual basis, in a context of higher costs for rent and petrolwhile underlying inflation is slowing, lending support to financial market expectations that the bank led by Jerome Powell will not raise interest rates next month.
US inflation report
In September, consumer prices in the United States increased monthly more than expected, just as the annual figure was above consensus, remaining at the highest level in the last 14 months. Last month, prices are grew by 0.4% compared to Augustas communicated by the Department of Labor, vs expectations for a rise of 0.3%. The “core” data, i.e. the one stripped of the price component of food and energy goods, grew by 0.3%, in line with forecasts. On an annual basisthe general data achieved a +3.7%, against expectations for a +3.6%, after the +3.7% also recorded in August. The “core” data recorded a +4.1%, in line with expectations, after +4.3% in August.
From the minutes of the latest meeting of the American central bank it emerged that bankers believe that the Fed should “proceed with caution” about upcoming decisions and that you are struggling with two risks main: don’t tighten the policy enough to curb high inflation and raise rates to a level that will have a excessive impact on the business broader economy.
According to Fed officials it would result a new increase is “appropriate”. of interest rates, when in September the institute opted for a second stop in the battle against inflation, keeping the cost of money unchanged at the highest level since 2001, although the future of the economy remains “highly uncertain”.
What the analysts say
On the monetary policy front, to reach the objective of 0.2% on a monthly basis, which represents the Fed’s target, it is essential that the prices of goods and services slow down significantly (0.6% is still too high a level high), says Jeffrey Cleveland, Chief Economist at Payden & Rygel. At the moment, therefore, “It is too early to declare victory over inflationalso because today money is spent mainly on services: this does not mean that during the November meeting the Fed will certainly opt for a rate increase, even if the data on US GDP for the third quarter and on Non Farm Payrolls ( NFP) leave the debate open.”
“The progress made on the inflation side is starting to stall, but you don’t have to get too excited – reiterates Callie Cox, US market analyst at eToro, commenting on the data on the American labor market. Much of the CPI’s strength is due to energy pricesand beneath the surface you can still see some encouraging details. Services inflation – he explains – has increased on a monthly basis, but it is unlikely that this trend will continue for much longer. Furthermore, the annual pace of the services component, net of rents, has been slowing down for nine consecutive months. Given progress on this front, then, the just-released inflation report may not be a catalyst for further rate hikes. The Federal Reserve – concludes Cox – has strong control over the economy and, at this point, one recession could be more worrying of another price surge. The Fed has been raising rates aggressively and we still don’t know what cracks are forming beneath the surface.”
Overall inflation in the United States fell from 0.6% month-on-month in August to 0.4% in September. On an annual basis, overall inflation stood at 3.7% against the expected 3.6%, while core inflation, a key metric for US central bank decisions, remained stable (0.3% on an annual basis). monthly). While market indicators, in the wake of some policymaker statements, until now they predicted a pause in the upward cycle of rates, the September inflation figure suggests that the decision could be more complexsays Richard Flax, Chief Investment Officer of Moneyfarm.