America can’t find a solution against hyperinflation

In America, high inflation is proving to be a constant evil. Consumer prices rose 3.7 percent in September, the same pace as in August, according to the Labor Department in Washington. Experts surveyed, however, expect a smaller decline of 3.6 percent.

The Federal Reserve has raised interest rates from near zero to a range of 5.25 to 5.50 percent from early 2022 to curb higher inflation. Traders now estimate the chances of a further hike this year to be somewhat higher, even if that is considered unlikely: in futures markets, the odds of a rate hike in December are estimated at around 40 percent. It was 28 percent before the new inflation data.

No relaxation in sight

“From the US Federal Reserve’s point of view, the figures are not enough to trigger further interest rate hikes, but they are not enough to trigger a clear easing, according to Commerzbank economists Christoph Balz and Bernd Weidensteiner.

US monetary authorities pay particular attention to the so-called key rate, excluding volatile prices for energy and food. The rate fell further in September – from 4.3 to 4.1 percent in August. “The core inflation rate is making further progress in its retreat. The two before the decimal point will only reappear when the spring sun reappears,” said Bastian Hepperle, economist at Hauck Aufhäuser Lamp Privatbank. In his view, the US Federal Reserve should be patient and refrain from raising key interest rates further.

Economists disagree on interest rate forecasts

Expert Dirk Clench from LBBW isn’t so sure. He points out that the inflation rate was generally slightly higher than expected. The data showed that service prices and especially housing costs rose sharply in September compared to previous months. So, in his view, it is “not a foregone conclusion” that the central bank has already reached the end of its rate hike phase.

In view of the uncertain economic outlook, the central bank is committed to a cautious approach to monetary policy, as can be seen from the minutes of the interest rate meeting in September. The key interest rate is not touched. Several U.S. monetary officials have recently indicated that monetary policy tightening measures are no longer so urgent as interest rates have risen in the capital markets. Because the financial markets were already moving in the desired direction.

Mitigation for stock brokers

The inflation data was not well received by investors on Wall Street. In late trading, the Dow Jones index of fixed stocks was down 0.4 percent at 33,680 points. The broader S&P 500 lost 0.3 percent to 4,365 points. Technology exchange Nasdaq’s index fell 0.1 percent to 13,649. According to Thomas Altman, portfolio manager at asset manager QC Partners, the inflation data underscores that interest rates in the US will remain high for a longer period of time.