One analyst explained the issue of inflation in the United States this way: "We're going from red hot to boiling hot." That is to say, things are improving but there is still a long way to go.
The consumer price index remained high in October in the US, at 7.7% annualized. However, experts saw promising signs that the rate hike is beginning to work, after four consecutive increases of 0.75% and a total of 3.75% since March. The growth of inflation, the lowest since January, is lower than expected, since a rise of 7.9% was predicted in the calculation of the last twelve months.
This data means that it is the fourth consecutive month of decline, after 8.2% in September and after the peak of 9.1% in June, although it continues to float in the territory of the highest level reached since the eighties and almost four times above the 2% target set by the Federal Reserve (Fed).
Everything indicates, as Jerome Powell, its president, has already announced, that, at the December meeting, the Fed governors will continue to raise rates, although it is expected to be half a point, in a more moderate way.
From September to October, the rise in prices remained at 0.4%, a percentage also lower than forecast (0.6%). These data from the Department of Labor come after last Tuesday's mid-term elections, in which Americans emphatically pointed to inflation as the biggest problem they face.
President Joe Biden, who this Wednesday congratulated himself given that the collapse of the Democrats did not exist in those elections (despite jeopardizing control of both chambers of Congress), found in these inflation numbers one more argument to persevere in his track. In an exercise of honesty, Biden acknowledged that the task of controlling inflation is much more complex than expected and the outcome is uncertain.
If the most volatile elements, such as the cost of food and energy, are excluded, the core of the price index rose 0.3% in the last month and remains at 6.3% annualized, data lower than expected , 0.5% and 6.5% respectively.
The fall of 2.4% in the price of second-hand cars helped ease inflation. Clothing prices shrank 0.7% and medical care shrank 0.6%.
Markets reacted strongly to this report, with Dow Jones-linked futures rising as much as 800 points. Treasury bonds fell sharply.
“The trend in inflation is a welcome development and it is great news,” said Michael Arone, a strategist at State Street Global Advisors, on CNBC. "But investors are still waiting to see what Powell does (in case he stops aggressively raising rates) and this morning's enthusiasm is a bit overdone," he added.
One of the reminders that is made is that inflation remains in a very high range, which annihilates salary increases, makes consumption difficult and causes breaks in the supply chain. This does not mean that there is clear hope, in view of the decline in recent months, that this path will continue in 2023. But there are risks. The unknown to be cleared up is what will happen to prices not related to housing services, such as the price of plane tickets, childcare, health or restaurant bills.
