“US Inflation News and Analysis: Experts Discuss the Fed’s Monetary Policy and Economic Impact”

2023-04-28 14:07:00

The slowdown in inflation in the United States is confirmed. The annual rise in prices fell in March in the United States to 4.2%, following having reached 5.1% the previous month, according to figures from the PCE index published Friday by the Commerce Department, privileged by the Federal Reserve (Fed) to adjust its monetary policy. US inflation is returning to more measured levels than inflation in the euro zone, which, although in a downswing phase, was 6.9% over one year in March.

Inflation: the drop planned by the government deemed too optimistic by the High Council of Public Finances

On a one-month scale, US inflation also slowed to 0.1%, in line with analysts’ expectations, according to the consensus published by briefing.com. Highly scrutinized by the Fed, core inflation, which excludes volatile energy and food prices, also rose from 4.6% to 4.7%. It therefore becomes higher than general inflation. It is 0.3% over one month, once more in line with inflation. In response, the New York Stock Exchange, clearly unconvinced, opened lower. The Dow Jones index lost 0.22%, the Nasdaq 0.25% and the broader S&P 500 index 0.10%.

The Fed’s reaction expected on Tuesday and Wednesday

These new figures on the inflation front raise questions regarding how the Fed will continue to tighten its monetary policy. Ultimately, the US central bank is aiming for an inflation target reduced to below 2% over one year, ie two times less than current inflation.

To do this, it has been raising its key rate for the past year, which now stands at 4.75-5%. The institution continues to announce additional increases to come, even if this weighs on economic activity since borrowing becomes more expensive for businesses and households.

Economic activity weakens

US GDP growth thus fell to 1.1% in the first quarter of 2023, according to figures published on Thursday, a sign of a sharp slowdown in the US economy which had grown by 2.6% in the last quarter. of 2022.

General inflation picks up once more in April but food prices fall

The next meeting of the Fed on Tuesday and next Wednesday should however give birth to a new rate hike, according to the expectations of financial analysts. The markets expect overall to a further increase of 0.25 percentage point.

(With AFP)