The rise in interest rates is starting to take effect in the United States. By impacting consumption, it slows the rise in prices. In March, inflation slowed to 5% year on year, according to the latest CPI figures published on Wednesday. A slightly lower increase than that anticipated by analysts (5.1%). Result: inflation slips to the lowest since May 2021, when they had increased by 6% in February over twelve months. Over one month, inflation came out at 0.1%, once morest 0.2% forecast, and following 0.4% in February.
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« This report shows continued progress in our fight once morest inflation,” President Joe Biden said in a statement from the White House. “Inflation is now down 45% from its summer peak. “, he underlined.
Following this publication, Wall Street moved cautiously in the green, welcoming this slowdown in inflation, before changing direction following the minutes of the Fed, the S&P 500 (-0.16%) and the Nasdaq (- 0.51%) falling slightly into the red around 7:00 p.m. GMT.
Energy pulls prices down
It was the fall in energy prices (-3.5% over the month and -6.4% over one year) which favored the slowdown in general inflation.
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So-called core inflation, which excludes volatile sectors such as food or energy, also slowed slightly over one month, to +0.4% once morest +0.5% in February. Over one year, however, it remains high at 5.6%, once morest 5.5% the month before. This level is still far from the objective of 2% underlying inflation that the American central bank (Fed) wants to achieve, which has raised its interest rates nine times in a row for a year. In March, rents and housing prices continued to rise sharply (+0.6% over one month), as did transport (+1.4%).
A final rate hike expected in May for the Fed
“There are encouraging signs…but with underlying inflation still elevated, there’s a good chance the Fed will continue its tightening with another final 25 basis point rate hike in the coming months. its next monetary meeting “, scheduled for May 2 and 3, commented Paul Ashworth, economist for Capital Economics.
The goals of the US Federal Reserve remain to return inflation to 2%. To achieve this, Jerome Powell, its president, decided to raise the key rates which were negative in the spring of 2022 to a range between 4.75 and 5% in March. If the Fed raises its overnight rates by another 25 basis points, they should therefore settle between 5% and 5.25%.
The central bank’s decision will also weigh in on the consequences of the mini-bank panic that led to three bankruptcies of American regional banks in early March. The Fed is looking to assess whether these setbacks have started to dry up lending, which might mean further rate hikes. Fewer loans granted would lead to a reduction in consumption, and therefore to a slowdown in inflation, as rate hikes do.
This banking stress should harden credit conditions in the United States, by the Fed Chairman’s own admission. It is also the same story in Europe where Christine Lagarde (President of the European Central Bank, Editor’s note) suggested that this crisis was going to do part of the work of tightening financial conditions ”explains Alexandre Baradez, strategist at IG France.
But for the chief economist of the International Monetary Fund (IMF), Pierre-Olivier Gourinchas, the turbulence in the financial sector should have consequences “ quite limited on growth, he told AFP on Tuesday during the institution’s spring meetings in Washington.
Unemployment does not fall
In March, the number of jobs created (236,000) remained lower than in February (311,000), slightly less than analysts’ expectations, which were for 238,000 creations, according to the consensus published by MarketWatch. ” Job creation continued to grow in tourism and hospitality, utilities, health and business services “Nevertheless specified the Department of Labor in its press release.
(With AFP)