High inflation in the US is putting pressure on the Fed chair to raise interest rates.
(Photo: dpa)
Dusseldorf The price level in the USA continues to rise rapidly. In February, consumer prices (CPI) rose by 7.9 percent compared to the same month last year – the strongest increase since January 1982, the US Department of Labor announced on Thursday.
Experts surveyed by Bloomberg had previously expected an inflation rate of 7.8 percent. The inflation rate was above economists’ expectations for the sixth time in seven months. In January it was still 7.5 percent.
Prices rose again across the board. Energy prices rose by 25.6 percent and accounted for almost a third of all inflation. Food prices rose 7.9 percent and housing costs rose 4.7 percent. The core inflation rate, which excludes the volatile developments in energy and food, rose by 6.4 percent.
A relatively small part of the recent increase in energy prices is already reflected in the February inflation data. However, the effect is only likely to have a full impact in the coming months.
Top jobs of the day
Find the best jobs now and
be notified by email.
The new development presents the Federal Reserve with an even greater balancing act, similar to that of the European Central Bank (ECB). The high inflation is putting monetary authorities under pressure to raise interest rates in the world’s largest currency area in a timely manner. At the same time, there is growing concern that the extremely high energy prices will have a lasting impact on the economy. If the Fed took action that was too drastic, this negative effect would be amplified.
The key interest rate in the USA is currently in a corridor of zero to 0.25 percent. The next Fed meeting is scheduled for March 16th. It is very likely that there will be a first increase there.
At the last Fed meeting at the end of January – i.e. before the start of the Ukraine war – Fed Chair Jerome Powell gave clear signals that interest rates would be raised soon. Powell’s appearance before the US Congress in early March confirmed this impression. However, the number of interest rate hikes in the current year and their scope remain open.
Speaking to Congress, Powell said he was preparing for “a new phase of uncertainty” in the wake of the Russian invasion of Ukraine. “We must respond quickly to incoming data and the evolving outlook,” the Republican said.
Before the Ukraine war broke out, many experts had advocated an increase of more than 0.25 percentage points. The expected number of rate hikes had also increased slightly.
More: ECB throttles bond purchases faster than previously planned