Prices in the US have not risen like this for decades. Is inflation really only determined by special corona factors, as the Fed thinks? President Biden wants to reverse the trend.
The upward trend in prices in the USA accelerated further from a high level in October. Consumer prices increased by 6.2 percent compared to the same month last year, as the Department of Labor announced in Washington on Wednesday.
This is the highest inflation rate since 1990. Analysts had only expected an acceleration to 5.9 percent on average. In the previous month, the rate was 5.4 percent.
Speaking of the surge, US President Joe Biden said it was his top priority to reverse that trend. He had instructed the National Economic Council to continue to take action against the rise in energy costs in particular. The recently adopted infrastructure package should also help to reduce bottlenecks in supply chains and improve the movement of goods.
According to the Ministry of Labor, the price increase was broad and affected various categories. Energy, rents, groceries, used cars and new cars were significantly more expensive. The inflation rate excluding energy and food, the core rate, rose from 4.0 to 4.6 percent. This rate is mostly seen by economists as a reliable measure to determine the underlying price trend.
Inflation is thus moving even further away from the medium-term target of the US Federal Reserve, which is two percent. The Fed, however, regards the increased inflation as a transitional development determined by special corona factors, which should soon weaken again. Critics complain that the longer the inflation rate remains high and the greater the deviation from the Fed’s target, the more this view is shaken.
Analysts referred to the well-known inflation drivers of the past few months, but warned of a widening price increase. The pressure from supply bottlenecks – a consequence of the corona-dependently restricted world trade – is still strong, said the analysis company Capital Economics.
Whether the Fed can maintain its loose course in this environment is becoming increasingly uncertain: “In view of these figures, it is becoming more and more difficult for the US Federal Reserve to attribute the acceleration in inflation solely to special and catch-up effects,” said analyst Dirk Chlench from the Landesbank Baden-Wuerttemberg.
The Fed has started to scale back its extremely loose stance a little. However, the change of course so far only relates to the securities purchases launched to stimulate the economy, which are to be gradually reduced. By contrast, the central bank wants to take its time with an interest rate hike.
Source From: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
