Inflationary pressures in the US are easing slightly – albeit only slightly. However, core consumer prices are rising slightly. A sign for the US Federal Reserve to continue its tight interest rate policy.
The wave of inflation in the USA is only fading slightly. The inflation rate for goods and services fell to 8.3 percent in August from 8.5 percent in July, according to the Washington Department of Labor. Experts had expected 8.1 percent. While fuel prices fell 10.6 percent from the previous month, the cost of groceries and rents continued to rise. The Labor Department’s food price index rose 11.4 percent year-on-year – the sharpest rise since 1979.
Higher interest rates are seen as a remedy against inflation – but they also act as a brake on economic growth. Nevertheless, several major central banks around the world had raised interest rates even more sharply in the past few weeks. The US Federal Reserve is fighting high inflation with unusually strong interest rate hikes recently. Another jumbo step is expected on the financial markets next week. In the US, interest rates are between 2.25 and 2.5 percent.
According to Fed Director Chris Waller, the US Federal Reserve can continue its aggressive interest rate course as fears of a recession recede. “Based on what I know now, I support a significant increase at our next meeting,” said Waller at the Institute for Advanced Studies (IHS) in Vienna.
The key interest rate must rise to a level that significantly reins in the demand for goods in the economy. The Federal Reserve (Fed) is ready to take decisive action to bring inflation back to the 2% target. “This is a fight we cannot and will not avoid.” Concerns that a recession had begun in the first half of the year have disappeared. This circumstance and also the strong labor market give the central bank the flexibility to fight inflation aggressively.