Inflation in the United States: A Surprising Increase in September
07:25 10/10/2024 - PesoMXN.com
(WASHINGTON) - In September, consumer prices in the United States showed a slight increase that exceeded expectations, although the annual inflation rate turned out to be the lowest in over three and a half years. This could lead the Federal Reserve to consider new interest rate cuts next month.
The Consumer Price Index (CPI) saw a 0.2% rise in September, remaining unchanged from August, according to the Department of Labor's Bureau of Labor Statistics report released on Thursday. Over the last 12 months leading up to September, the CPI rose 2.4%, marking its lowest year-over-year increase since February 2021, following a 2.5% hike in August. Economists surveyed by Reuters had expected a 0.1% growth in CPI and a year-over-year rate of 2.3%. Annual inflation has slowed since reaching a peak of 9.1% in June 2022. This decline was critical for the Federal Reserve to shift its focus back to the labor market and decide on an unusual 50 basis point rate cut in September. According to the minutes of that meeting released on Wednesday, a "considerable majority" of monetary policy makers supported the start of a less restrictive era but seemed to agree that this first step did not commit the Fed to a specific pace of future cuts. This first rate decrease since 2020 left the central bank's official interest rate between 4.75% and 5%. During 2022 and 2023, the Fed had raised rates by a total of 525 basis points. However, the strength of the labor market and robust consumer spending has led investors to reconsider their expectations for another half-point cut next month. In September, the economy added the largest number of jobs in six months, and the unemployment rate fell to 4.1%, compared to 4.2% in August. Additionally, revisions of national accounts from 2019 through the second quarter of this year revealed that the economy was in better shape than previously estimated. However, there are some bottlenecks, particularly in the rental sector, that are slowing the cooling of core inflation.
Excluding the more volatile components like food and energy, the CPI increased by 0.3% in September, the same as in August, and the core CPI, which excludes these items, showed an annual increase of 3.3%, up from 3.2% in August. This morning, financial markets estimated about a 76% probability of a 25 basis point rate cut at the Fed's scheduled monetary policy meeting on November 6 and 7, according to CME Group's FedWatch tool, and a 24% chance that rates would remain unchanged.
The economic performance of the U.S. reflects a significant recovery, but it's important not to lose sight of the global environment and its implications. The Federal Reserve's decisions can influence capital flow and economic stability not only in the U.S. but also in countries like Mexico. Investors and consumers should stay alert to these fluctuations to make more informed decisions regarding their finances.
