The central bank attributes the price increase mainly to temporary factors.
(Photo: Reuters)
Frankfurt, Düsseldorf US inflation continues to rise. In September consumer prices in the world’s largest economy rose by 5.4 percent compared to the same month last year. The US Department of Labor announced.
In August prices had risen by 5.3 percent. Economists had expected this value for September as well.
The strong price dynamics are increasing the pressure on the US Federal Reserve to tighten its monetary policy. Most recently, it had signaled that it could soon begin scaling down its massive bond purchases. Experts expect the Fed to announce this in November and then reduce purchases from December.
At the Fed meeting in September, Federal Reserve Chairman Jerome Powell had promised to end the purchases completely by mid-2022. The Fed is currently buying mostly US government bonds for $ 120 billion a month.
In view of the high inflation rates, however, the question arises whether this course is still appropriate for the ultra-loose monetary policy. The minutes of its September meeting, which the central bank will publish on Wednesday evening, could provide further information on the Fed’s course.
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One of the biggest price drivers in September was energy, which rose 24.8 percent over the previous year. The price of gasoline rose by 42.6 percent and that of gas by 42.1 percent. Among other things, it is noticeable here that the oil price had fallen sharply in the past year. Therefore, it has increased particularly strongly compared to the low prior-year figures.
Used cars and trucks also increased in price by 24.4 percent compared to the previous year. Compared to August, however, the growth slowed somewhat here. The prices for new cars rose by 8.7 percent, the strongest increase since September 1980. Economists attribute this mainly to the global shortages in chips, which have caused the production of new cars to weaken.
Significantly higher inflation expectations
So far, the Fed has always argued that the higher inflation was mainly due to temporary factors caused by the pandemic, such as the supply shortages. For 2022, she therefore expects significantly lower values again.
However, this view is controversial among economists. Some believe that high inflation will last longer. For example, former US Treasury Secretary Larry Summers warns against underestimating inflation.
Recently, inflation expectations have also risen significantly. According to a survey by the regional central bank of New York, American households expect a figure of 5.3 percent for next year. For the year 2024 they are assuming a rate of 4.2 percent. Both are the highest values since the survey began eight years ago.
The increased inflation expectations and the prospect of a more rapid tightening of monetary policy in the USA have recently also led to a significant increase in bond yields in the USA. Since the Fed meeting in September, the yield on ten-year US Treasuries has risen from just under 1.3 to around 1.6 percent. This is particularly affecting the stock markets.
More: The specter of stagflation – How economists assess risk