Inflation in the US falls to 6.5 percent in December

Shopping in the New York borough of Brooklyn

The Fed is now countering high inflation with strict interest rate hikes.

(Photo: dpa)

Washington Price pressure in the USA weakened again in December. Consumer prices rose by 6.5 percent compared to the same period last year. The Ministry of Labor announced on Thursday.

Experts in the USA had expected this value – the lowest since October 2021. Prices rose by 7.1 percent in November and by 9.1 percent in June. Compared to the previous month, prices fell by 0.1 percent.

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The new price data strengthens hopes that the US Federal Reserve will slow the rate hikes in the new year. The monetary authorities have raised the key interest rate in several steps over the past few months to a range of 4.25 to 4.50 percent. In December, the Fed chose an adjustment of 50 basis points after four hikes of 0.75 percentage points each.

As inflation weakens, it has recently signaled that the pace of monetary tightening will be slowed. The Fed’s inflation target is two percent, and the next interest rate decision is on February 1st.

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The central bankers around their President Jerome Powell are facing the major challenge of having to counter the still very high inflation in the country with an aggressive interest rate policy without putting too much strain on the economy. However, various economic indicators, such as those from the US labor market, are currently still robust.

However, monetary policy only has a delayed effect on the economy. For this reason, the CEO of the major bank JP Morgan, Jamie Dimon, had spoken out in advance for a pause in the rate hike process in order to be able to assess the effect of the steps taken so far. However, according to Dimon, the Fed may have to raise interest rates even more than expected later on.

Market expert Mohamed El-Erian, who advises Allianz among other things, had previously tweeted that the expected decline was important. But it does not mean the end of the inflation problem. It is important that a declining trend is also discernible in core inflation and in inflation on a broad basis.

Core inflation, which excludes energy and food prices, which are particularly volatile, rose 5.7 percent year-on-year in December (up 0.3 percent compared to November). Energy prices rose by 7.3 percent (down 4.5 percent) year-on-year, and groceries by 10.4 percent (up 0.3 percent).

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