High US inflation falls noticeably

The high price pressure in the USA is falling noticeably and is providing the central bank with arguments for a less aggressive approach to interest rate hikes. The inflation rate for goods and services fell to 7.7 percent in October from 8.2 percent in September, the Labor Department said on Thursday. Experts polled by Reuters had expected 8.0 percent. It is the fourth decline in a row and fuels hopes that inflation may have peaked.

“If the inflation rate continues to fall, the US Federal Reserve will take a less harsh stance and slow down its rate hikes in December,” says economist Bastian Hepperle from Hauck Aufhäuser Lampe Privatbank. In his opinion, the key interest rate peak should be reached in spring 2023.

The Federal Reserve has been raising interest rates in unusually large increments for months to keep inflation in check. Most recently, she increased it again by three-quarters of a percentage point. It is currently in a range of 3.75 to 4.00 percent. The Fed is poised to step up but signaled that it would soon slow down some of the pace of tightening moves. US currency watchdog Neel Kashkari, however, called it “completely premature” to talk about a turning point in monetary policy.

Stock indices rise significantly

The US monetary authorities are aiming for an inflation rate of 2.0 percent. However, they are aware that their rate hikes only take effect with a time lag. Fed boss Jerome Powell now has reason to take a deep breath, says VP Bank chief economist Thomas Gitzel: “Even if inflation rates are still high, the direction is right.” If there are no further external shocks after the Corona crisis and the Ukraine war, inflation rates will fall even more noticeably in the coming year: “The point at which the Fed can refrain from further interest rate hikes is getting closer.”

The surprisingly sharp fall in the US inflation rate depressed interest rate expectations on the stock exchanges and made investors appetite for risk again. Of the German stock index (DAX) shot up 3.5 percent on Thursday to 14,146 points, and the Dow Jones index in New York even rose by 3.7 percent.

hb (rtr, dpa)