Inflation persists and firm in the United States

Inflation persists and firm in the United States

Inflation was persistent in September in the United States, despite the already strong measures taken to curb it, complicating the task of Joe Biden who, a month before the mid-term elections, recently admitted the possibility of a recession.

Prices rose 8.2% in September in one year, according to the IPC index -to which he refers- published this Thursday by the Labor Department. This represents a very slight slowdown in inflation, since in August prices rose by 8.3% in one year.

But it is above all the increase in prices in just one month that shows that inflation is tenacious: it accelerated again, with +0.4% between August and September, compared to +0.1% between July and August. And that’s more than the 0.3% rise that analysts were expecting.

September’s CPI “shows some progress in fighting rising prices, although we still have work to do,” President Joe Biden said in a statement, noting that “prices remain too high.”

Those US inflation figures sent the yen to its lowest level since 1990 and depressed Wall Street, which opened lower on Thursday morning.

Housing rents, food and health care “were the main contributors to the monthly increase,” the Labor Department said in a statement.

Gasoline prices at the pump, however, fell 4.9% and continued to fall after rising due to the war in Ukraine. But natural gas and electricity cost more than in August.

– “Unacceptable” level –

Inflation “remains stubbornly high,” said Kathy Bostjancic, an economist at Oxford Economics, in a note noting in particular “a broad-based rebound in the prices of basic services,” other than food and gasoline.

Indeed, so-called core inflation, which excludes the volatile food and energy sectors, held steady for a month at 0.6% but posted its biggest one-year increase in 40 years at 6.6%.

This rise in the cost of living in American households is a strong argument used by Joe Biden’s opponents, one month before the mid-term elections that give rise to the renewal of some of the elected members of Congress. The slim majority of the presidential field is at stake.

Joe Biden had admitted on Tuesday that it was “possible” that the United States suffered “a very mild recession.”

Because the fight against inflation involves slowing down economic activity. This is what the US central bank (Fed) is trying to do, but the longer inflation persists, the stronger the institution must act, at the risk of provoking a recession.

The September figures “support an aggressive monetary policy until prices show clear signs of a sustained slowdown,” said Rubeela Farooqi, an economist at HFE.

Fed officials believe that a period of lower growth and a slowdown in the labor market will be necessary to overcome this inflation, which they consider to be at an “unacceptable” level, according to the minutes of their September meeting, released on Wednesday.

They had pointed out that inflation “had not yet responded” to the rate hikes designed to curb it, and some had judged that “acting too timidly would be more costly than acting firmly”.

– Revalued pensions –

However, US inflation has slowed since peaking in June when prices soared 9.1% year-on-year, their biggest rise since December 1981.

US retirement and disability pensions, indexed to the CPI, will thus experience, starting in January, their greatest revaluation since 1981, the US Social Security Administration announced, also on Thursday. His index rose 8.7%, an average increase in payments of more than $140 a month.

On a global scale, the fight against high inflation, which affects poor and developing countries even more than developed countries, is now the priority of political leaders.

The effects of the war in Ukraine on energy and food have added to supply chain disruptions related to Covid-19.

The International Monetary Fund (IMF) on Tuesday revised upwards its general inflation forecasts for 2022 and 2023, and now forecast 8.8% and 6.5% respectively. And he warned that the recession is likely to hit several developed countries in 2023.

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