(Washington) Inflation was persistent in September in the United States, despite the already strong measures taken to slow it down, complicating the task of Joe Biden who, a month before the midterm elections, recently admitted the possibility of a recession.
Updated yesterday at 11:18 a.m.
Prices rose 8.2% in September year-on-year, according to the CPI index-which refers-released Thursday by the Labor Department. This represents a very slight slowdown in inflation, since in August prices had risen by 8.3% year on year.
But it is above all the increase in prices over just one month that shows that inflation is tenacious: it accelerated again, with +0.4% between August and September, against +0.1% between July and August. And that’s more than the 0.3% increase that was expected by analysts.
September’s CPI “shows some progress in tackling rising prices, although we still have work to do,” President Joe Biden said in a statement, noting that “prices are still too high.”
Those US inflation numbers sent the yen down to its lowest since 1990 and depressed Wall Street, which opened sharply lower on Thursday morning.
Housing rentals, food and medical care “were the major contributors to the monthly increase,” the Labor Department said in a statement.
Gasoline prices at the pump, however, fell 4.9%, continuing to decline after surging due to the war in Ukraine. But natural gas and electricity cost more than in August.
“Unacceptable” level
Inflation “remains stubbornly high”, commented Kathy Bostjancic, economist for Oxford Economics, in a note in which she notes in particular “a continuous generalized surge in the prices of basic services”, other than food and gasoline.
Indeed, so-called core inflation, which excludes the volatile food and energy sectors, remained stable over one month, at 0.6%, but reached its strongest rise over one year in 40 years, at 6.6%.
This rise in the cost of living for American households is a strong argument used by Joe Biden’s opponents, one month before the mid-term elections giving rise to the renewal of some of the elected members of Congress. The slim majority of the presidential camp is at stake.
Joe Biden had admitted on Tuesday that it was “possible” that the United States would suffer “a very slight recession”.
Because the fight against inflation means slowing down economic activity. This is what the US central bank (Fed) is trying to do, but the longer inflation persists, the harder the institution must strike, at the risk of causing a recession.
The September figures “support aggressive monetary policy, until prices show clear signs of decelerating on a sustained basis,” said Rubeela Farooqi, economist for HFE.
Fed officials believe that a period of weaker growth and a slowdown in the job market will be necessary to overcome this inflation, which they consider to be at an “unacceptable” level, according to the minutes of their meeting. September, released Wednesday.
They had noted that inflation had “not yet responded” to the rate hikes intended to curb it, and some had judged that “to act too timidly would be more costly than to act decisively”.
Revalued pensions
However, US inflation has slowed since peaking in June, when prices rose 9.1% year-on-year, their biggest rise since December 1981.
American retirement and disability pensions, indexed to the CPI, will thus experience, from January, their strongest revaluation since 1981, announced, also Thursday, the American administration of social security. Their index was raised by 8.7%, an average increase in payments of more than $140 per 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 headline inflation forecasts for 2022 and 2023, and now forecasts 8.8% and 6.5% respectively. And he warned that the recession is likely to affect several developed countries in 2023.