Rising prices are putting a strain on consumers’ budgets.
(Photo: Bloomberg)
Frankfurt US inflation continues to rise. In October consumer prices in the world’s largest economy rose by 6.2 percent compared to the same month last year. The US Department of Labor announced.
In September prices had risen by 5.4 percent. Experts had expected an increase to 5.8 percent for October.
The US Federal Reserve (Fed) assumes that the higher inflation is temporary and attributes this primarily to factors caused by the pandemic, such as delivery bottlenecks. Originally, the central bank had predicted a significant decline in inflation for 2022. In the meantime she has become more cautious. Fed chairman Jerome Powell recently admitted that it is uncertain how long delivery bottlenecks and other pandemic-related effects will be reflected.
The main price driver was energy, which was 30 percent more expensive than in the previous year. Last year, the oil price collapsed as a result of the pandemic. Compared to the very low values of the previous year, it is now correspondingly higher. If one takes into account the particularly volatile prices for energy and food, the price increase was 4.6 percent compared to the same period of the previous year.
Recently, inflation expectations derived from market prices have risen significantly. Investors are therefore already speculating on an interest rate hike in the middle of next year. As a prerequisite, however, the Fed must first end its securities purchases with a volume of currently 120 billion dollars a month. Fed Chairman Jerome Powell announced last Wednesday that these would be gradually reduced from mid-November.
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Initially, the volume of bond purchases is to be reduced by ten billion dollars and that of mortgage securities by five billion dollars. The operation is to be repeated to the same extent in December. This process of gradually reducing the dose of cash injections, known in technical jargon as tapering, should be completed by next year. If the Fed maintains its pace, that would be in June 2022.
More: The US Federal Reserve is already curbing its bond purchases this month.