Inflation finally seems to be slowing down in the United States, and fell in October to its lowest level since January 2022, showing that the measures taken by the central bank are starting to work, but it nevertheless remains at a very high level.
Consumer prices rose 7.7% in October from October 2021, according to the benchmark CPI index, released by the Labor Department on Thursday.
It is indeed a much weaker increase than that of 8.2% which was recorded in September over one year. And it is also less than the 7.9% expected by analysts, according to the consensus of Market Watch.
And, in just one month, prices rose 0.4%. This is the same increase as that recorded between August and September, and it is also a good surprise, since analysts were expecting a further acceleration, and were counting on +0.6%.
This price increase had become one of the main themes in the campaign for the midterm elections, which were held on Tuesday, and whose final results were still not known on Thursday morning.
The Republican opposition first took up the subject of inflation, implicating President Joe Biden in this soaring price. The Democrats, in a hurry to catch up with their competitors on this ground which has become the main concern of the Americans, seized it in the final stretch.
Housing accounts for a large part of this inflation, both for renting and for buying.
Real estate prices have soared during the pandemic, fueled by historically low rates and the remoteness of cities enabled by telecommuting.
The median price for a single-detached home rose 8.6% in the third quarter, compared to the same period last year, according to data from the Association of Realtors (NAR), also released Thursday.
Interest rate
This slowdown could be a sign that the measures taken by the American central bank, the Fed, to bring inflation back in line, are finally starting to bear fruit.
It is indeed the powerful Federal Reserve that has the heavy task of bringing price increases back to around 2% over one year, a level considered healthy for the economy. However, it favors another measure of inflation, the PCE index, which remained stable in September at +6.2% over one year.
To bring down inflation, the Fed is seeking to provoke a voluntary slowdown in American economic activity, by raising interest rates, which should discourage household consumption and thus ease the pressure on prices.
And the health of the job market is seen as a gauge of the effectiveness of these measures. The unemployment rate, in fact, should go up a little.
The effects of this monetary tightening may have started to be felt in October, since the unemployment rate rose by 0.2 points, to 3.7%. But job creations, although less strong than in October, remained solid.
It will take time, warned Fed Chairman Jerome Powell last week.
Faced with the persistence of inflation, the Fed announced on 2 November a further increase in its key rate, the sixth in a row. This, raised by 0.75 percentage point – a sharp rise – is now located in a range of 3.75% to 4%, its highest level since January 2008.