After having set its highest level in four decades, the inflation in the United States dropped in the last year from a shocking 9.1% to 3% in June. It is the country where the cost of living fell the fastest after having registered a historical record.
“Part of the explanation for the relative success of the US in reducing inflation is the role of energy prices,” he says. wendy edelbergDirector of The Hamilton Project and Senior Fellow in Economic Studies at the Brookings Institution Research Center.
The country has been exposed to the consequences of the war in Ukraine in a different way than European nations, where the energy hit was much deeper given the close dependence on Russian supplies.
It seems that the largest economy in the world managed to control the inflationary pressuresbut in reality, says the economist, It has been a much more complex path than it seems.
“Until recently we were quite frustrated and worried,” explains Edelberg in dialogue with BBC Mundo, especially due to the difficulties in lowering basic or subjacent inflation, that is, excluding the cost of energy and food.
Inflation in the US and the role of interest rates
In the United States there was a gigantic increase in the demand for goods accompanied by a rise in the price of products, “as if it were Christmas every week”, the expert comments. Recently, that demand has cooled, in what could be the downward curve of the roller coaster.
And this has a lot to do with the monetary policy of the US Federal Reserve (the FED) that it embarked on a successive and deep increase in interest rates to control the escalation of prices.
The Fed raised interest rates “in a way unusually aggressive in controlling inflation“, says david wilcox, senior economist at the Peterson Institute for International Economics and Bloomberg Economics.
That made borrowing to buy a house or a car, or get financing for a new investment project, much more expensive, acting as a kind of brake on spending to prevent the inflationary spiral from continuing to grow.
One factor that has contributed to the lowering the high cost of living in the US it is the normalization of the supply of goods available in commerce, after the ravages caused by the Covid-19 pandemic, Wilcox tells BBC Mundo.
The serious problems with the supply chains of international trade, which generated a “container crisis”, with shortages of some products and astronomical shipping costs, began to be solved.
So, a greater supply of goods managed to lower inflationary pressures and alleviate the commercial chaos derived from the health crisis. But when things were looking up, war broke out in Ukraine in February 2022 and a new challenge added fuel to the inflationary fire.
To united states It played in his favor to have less energy dependence on Russiaand although inflation skyrocketed months after the war began, it also dropped rapidly, to the extent that the government controlled spending and the FED stepped on the brakes.
Will there be a recession in the United States?
Economic predictions pointed out that with the historic increase in interest rates to control inflation, the economy had to suffer. Typically, higher rates affect economic growth and increase unemployment.
Paradoxically, that has not yet happened in the United States. Employment remains strong and a recession is not just around the corner for now. This paradox remains an unsolved mystery for economists.
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“This story isn’t over, it’s like a TV series we’ve only seen the first season of,” says Wilcox. “We don’t know what the ending the writer has planned.” And it is that a labor market with such good health is something very strange in the midst of the current circumstances.
According to Edelberg, the first signs of a more subdued demand for workers have begun to appear. The idea of a “soft landing” for the US economy, rather than a deep recession with serious effects for the rest of the world, is gaining more and more ground.
Source: Ambito
