New York, Frankfurt It’s a signal investors had been hoping for for a long time. Inflation in the US rose less sharply in October than assumed. The inflation rate was 7.7 percent, as announced by the US Department of Labor on Thursday in Washington.
That’s down from September, when it was 8.2 percent. Economists had expected a drop to 7.9 percent. The increase in prices compared to the previous month was also lower than expected at 0.4 percent. A value of 0.6 percent had been expected here.
Investors reacted euphorically. Shortly after the figures were published, the leading German index, the Dax, shot up. It gained almost three percent after being almost unchanged before. The yield on ten-year US government bonds also fell below the four percent mark.
The leading US indices also rose significantly before the market. The cryptocurrencies, which have come under significant pressure in the past few days, have also gained momentum. Bitcoin, the largest and oldest digital currency, gained around five percent to $17,478.
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Market expert Mohamed El-Erian, who advises Allianz among other things, believes that the inflation figures are a good indication that the Fed could proceed more slowly with its interest rate hikes as planned. In particular, the prices for housing costs increased somewhat less than expected. The inflation rate for food and used cars also fell.
The Fed last week raised interest rates in the US by three-quarters of a percentage point to a range of 3.75 to 4.00 percent. Fed Chair Jerome Powell promised further hikes. However, he signaled that these could be somewhat lower than before. As a result, yields on American government bonds have already fallen somewhat, which has been positively received by the markets.
However, economists warned against too much optimism. Diane Swonk, chief economist at management consultancy KPMG, expects the Fed to hike rates by 0.5 percentage points at its next meeting in mid-December. But the inflation data is not “strong enough to allay the Fed’s concerns,” she clarified.
At the most recent press conference in early November, Federal Reserve Chairman Powell emphasized that the central bankers would have to see several data points in a row that would confirm a clear downward trend in inflation. Only then could the Fed consider pausing interest rate hikes.
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