The Fed chief remains deliberately cautious.
(Photo: AP)
Washington, Düsseldorf, Frankfurt The inflation rate in the USA remains at a high level. In August, consumer prices in the world’s largest economy rose by 5.3 percent compared to the same month last year. The US Department of Labor announced on Tuesday afternoon. Economists have calculated an inflation rate of 5.4 percent.
In July consumer prices had increased by 5.4 percent. Compared to the previous month, the prices are 0.3 percent (expectation: 0.4 percent) higher. The core inflation rate, which excludes volatile food and energy prices, is 0.1 percent.
On Wall Street, the Dow Jones and S&P 500 opened with marginal gains. The dollar fell slightly, while ten-year US bond yields fell slightly after initial gains. The gold price made up for its daily losses and rose to just under $ 1806.
The Fed’s next interest rate decision is due in the coming week, and investors around the world are eagerly awaiting it. The US Federal Reserve could start scaling back its bond purchases later this year. The timing and form of the turnaround in monetary policy are, however, still open.
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Since the beginning of the corona pandemic, the key interest rate in the US has been zero. In addition, the Fed buys bonds and mortgage paper with a volume of 120 billion dollars every month. The central bank is therefore likely to begin by scaling down bond purchases (“tapering”).
If inflation in the US had risen further, the pressure on Federal Reserve Chairman Jerome Powell would have increased further. The slight weakening in August should now be more in line with his line of argument. A lively and very controversial debate has arisen in the USA about the further course of monetary policy. More and more well-known economists are warning of a belated reaction by the Fed, which could then shock the financial markets all the more violently.
However, Powell remains convinced that higher inflation is a temporary phenomenon. The Fed expects less momentum in the next few months. The central bank chief made this clear several times at the much-noticed virtual central bank conference in Jackson Hole at the end of August.
Another influencing factor is the development on the US labor market. There, the growth in new jobs had slowed surprisingly sharply in the past month. Only 235,000 new jobs were created in August. Powell is also counting on “substantial progress” in the job market, he recently stressed.
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