Inflation in the US slows, relieves interest pressure and US stocks soar

Inflation in the United States accumulated in the 12 months through October increased by 7.7%, the US government said on Thursday (10). This number represents lower cost-of-living growth than last month and reveals a steady slowdown in recent months. Analysts consulted by the Bloomberg agency projected that the increase would be 7.9%.

Until September, the US consumer price index accumulated a high of 8.2% in 12 months, after having risen 8.3% in August and having reached a peak of 9.1% in June, which was the biggest increase in the year. cost of living since November 1981. These levels, however, are still much higher than the 2% target for the country’s annual inflation.

In the monthly comparison with September, the price index rose 0.4% in October, the same pace as in the previous month.

There was also a deceleration in core inflation, which excludes energy and food prices because they are considered too volatile to allow a more accurate assessment of the situation.

The core showed that 12-month inflation rose 6.3% in October, down from 6.6% in September, which was the biggest increase since August 1982.

At the opening of the New York stock markets, the Nasdaq index soared more than 4.5%. This segment has many companies in the technology sector with great growth potential, but which depend on low interest rates for this. The US market benchmark, the S&P 500, jumped nearly 4%.

“Today’s data is an important indicator of the Fed’s next decision, which should slow down interest rate hikes,” commented Beto Saadia, economist and partner at BRA BS.

It is the need to deal with the highest inflation in 40 years that has forced the Fed (Federal Reserve, the US central bank) to apply a historic interest rate hike, the main reason for the American stock market to have already dropped about 20% this year. year.

Earlier this month, the monetary authority increased the country’s benchmark interest rates for the sixth time in 2022, the fourth increase followed by 0.75 percentage point. The rate is currently at a level between 3.75% and 4% per year.

Jerome Powell, chairman of the Fed, said when releasing the rate this month that “it will be appropriate to slow the rate of increase [dos juros]” soon, but highlighted that the heated job market and, mainly, the persistent high inflation forces the authority to “keep the restrictive policy [juros elevados] for a while,” he commented.

The rate of interest rate acceleration is the fastest in the country in more than four decades and, moreover, before June of this year, the last time the rate had risen by 0.75 point was in 1994.

“We will stay the course until the work is done,” said Powell, reinforcing that the goal is to return to 2% inflation per year.

Making credit more expensive is the most impactful way adopted by the monetary authority to withdraw money from circulation.

This is normally the main measure adopted by central banks in an attempt to curb the inflation that is advancing in various parts of the world.

The acceleration of prices on a global scale began this year as a reflection of supply failures caused by the pandemic, a problem that worsened with the War in Ukraine.

In the United States, the committee responsible for the Fed’s monetary policy, better known by the acronym Fomc, has been approving rate hikes by the central bank since March, when the indicator was practically zero.

There is fear, however, that the cost of this monetary tightening will be a serious slowdown in economic activity on a global scale.

Among the effects of a recession are the absence of business growth, a consistent increase in unemployment and an exaggerated fall in consumption.

with Reuters