The inflation The consumer price in the United States continued to fall in December, for the sixth consecutive month, reaching the lowest level in over a yeargovernment data showed on Thursday, indicating that the worst of the price increases may be over.
The consumer’s price index (CPI) increased a 6.5 percent over the previous yearthe lowest increase since October 2021 and a slowdown from November’s 7.1 percent rise, the Labor Department said.
In addition, in monthly terms, consumer prices fell by one tenth, at a time when it is closely watched whether the increases in interest rates of the Federal Reserve have an effect on price containment.
The data is a sign that the worst run of inflation in four decades is gradually abating. Even so, the Fed doesn’t expect inflation to slow enough to approach its 2% target until well into 2024. The central bank is expected to raise its benchmark rate by at least a quarter point at its next meeting. at the end of this month.
Even if it gradually slows down, inflation remains a painful reality for many Americans, especially as staples like food, energy, and rent have skyrocketed in the past 18 months.
For now, inflation is coming down, and the national median price of gallon of gasoline it has fallen from a high of $5 a gallon in June to $3.27 a gallon on Wednesday, according to AAA.
The problems of the supply chain, which previously inflated the cost of products, have been largely resolved. Consumers have also shifted much of their spending away from physical goods toward servicesLike the trips and the leisure. As a result, the cost of goods, including used cars, furniture, and clothing, has fallen for two consecutive months.
The employment report December of last week reinforced the chance of avoiding a recession. Even after the seven Federal Reserve rate hikes last year and with inflation still high, businessmen created 223,000 jobs in December, and the unemployment rate fell to 3.5%, matching the lowest level in 53 years.
At the same time, the median wage growth per hour slowed, which should ease the pressure on companies to raise prices to cover their higher labor costs.
Another positive sign for the Federal Reserve efforts to stifle inflation it’s that Americans generally expect price increases to subside in the coming years. This is important because so-called “inflation expectations” can be self-fulfilling: if people expect prices to continue to rise sharply, they will typically take action, such as demand higher wageswhich can perpetuate high inflation.
On Monday, the Federal Reserve Bank of New York stated that consumers now expect a 5% inflation for next year. This is the lowest expectation in almost 18 months. Over the next five years, consumers expect inflation to average 2.4%, just above the 2% target set by the Federal Reserve.
However, in their statements in recent weeks, the heads of the Federal Reserve have underlined their intention to raise your interest rate short-term benchmark by an additional three-quarters of a point in the coming months, to just above 5%. These increases would be added to the seven of last year, which almost doubled mortgage rates and made loans for cars and companies more expensive.
The futures prices show that investors expect the central bank to be less aggressive and apply just two quarter-point hikes between now and March, leaving the Fed rate just below 5%. Investors also expect the Fed to cut rates in November and December, according to the CME’s FedWatch tool.
Fed Chairman, Jerome Powell, It has tried to buck that expectation of fewer hikes this spring and cuts later in the year, which may make the Fed’s job harder if investors push up stock prices and cut bond yields. Both trends may favor faster economic growth just as the Federal Reserve tries to cool it down.
The minutes of the Fed’s December meeting show that none of the 19 policymakers foresee rate cuts this year.
Still, last week James Bullard, president of the Federal Reserve Bank of St. Louis, said some optimism that this year “actual inflation will likely follow inflation expectations lower”, suggesting that 2023 could be a “disinflation year”.
(With information from AFP, EFE and AP)