The rise in inflation in the US is weakening again. In return, there is growing hope of an end to the US Federal Reserve’s major rate hikes. The data and speculation act like fuel on the stock exchanges.
The price increase in the USA continues to weaken – and the stock exchanges are cheering. Because falling inflation is fueling speculation that the Fed will make smaller interest rate hikes. The inflation rate for goods and services fell to an annual low of 7.1 percent in November, according to the Washington Department of Labor. Experts had expected 7.3 percent, after 7.7 percent in October. Core inflation – excluding volatile energy and food prices – fell to 6.0 percent from 6.3 percent. Here, too, the decline was stronger than expected. The decline raises hopes that the US is past the peak of the inflation wave. In June, the inflation rate was 9.1 percent.
Despite the now significantly lower level, the Fed’s target of two percent is still a long way off. On the futures markets, people are preparing for the fact that the key interest rate will rise another half a percentage point at the Fed meeting on Wednesday and that a smaller step of 0.25 percentage points will follow in February. The Fed does not yet consider the fight against inflation to be won, but intends to slow down when it comes to interest rate hikes. The US monetary authorities had previously raised the key monetary policy rate by a whopping 0.75 percentage points four times in a row.
The fact that they could now take their foot off the gas gives investors a sigh of relief: the surprisingly strong decline in the rate of inflation in the USA drove the stock markets. The Dax shot up by up to 2.3 percent points. The dollar index, on the other hand, came under pressure and lost up to 1.1 percent.
Helaba economist Ulrich Wortberg assumes that inflation will continue to decrease: “The base effect due to the price surge in November 2021 is noticeable and this effect will last until June 2023 and get even bigger.” In this respect, in his view, it should not come as a surprise if the US inflation rate falls gradually in the coming months.
Chief economist Thomas Gitzel from VP Bank believes that the US monetary authorities have almost reached the interest rate high. “Especially the further falling inflation rates that are to be expected will take the pressure off the Fed to continue to significantly tighten the interest rate screw.” However, the Fed will initially want to create a different impression on Wednesday: “The Fed’s motto will be caution. The markets should not get the impression that everything is fine again.”
