Will key interest rates in the USA remain stable for the time being?
(Photo: Bloomberg)
Denver Inflation in the USA is rising again: for August, the US inflation rate is 3.7 percent compared to the previous year – and is therefore even higher than analysts had expected. In July the value was 3.2 percent. Core inflation, which excludes volatile energy and food prices, fell from 4.7 to 4.3 percent.
This brings the US Federal Reserve (Fed) back into focus. Economists expect the Fed to keep interest rates stable at its meeting on September 20th. The monetary authorities had raised interest rates at eleven of the last twelve meetings. They are now in a range of 5.25 to 5.5 percent – the highest level in 22 years. Monetary policymakers are placing greater emphasis on core inflation, which could strengthen the Fed’s stance, economists believe.
Price drivers last month were primarily rising energy prices, which was also noticeable at gas stations. Gasoline prices rose 6.6 percent in August compared to the previous month, according to data from the US Automobile Association (AAA). Such a significant increase “is bitter because all consumers feel it,” says Tom Lee from the analysis house Fundstrat.
At the major central bank meeting in Jackson Hole at the end of August, Fed Chairman Jerome Powell remained open about whether he would raise interest rates again in the winter. Market participants hope that the end of the interest rate hikes has come. However, this is not certain, as capital market expert Mohamed El-Erian points out.
He assumes that inflation in the USA could rise further in the coming months, driven, among other things, by further rising prices for oil and some food products. Therefore, it could be that the inflation rate “stays at three to four percent and is therefore permanently above the Fed’s inflation target of two percent,” wrote El-Erian in a guest article for the Bloomberg news agency on Monday.
The Fed would then be faced with a particularly delicate decision: “Either it tolerates higher inflation or it pursues the two percent target with further interest rate increases – thereby increasing the risk of a recession and new turbulence on the financial markets,” said El-Erian.
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