Home » Inflation dilemma: here are some reasons that push us to see the price rush slow down quickly between now and the end of 2023

Inflation dilemma: here are some reasons that push us to see the price rush slow down quickly between now and the end of 2023

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Inflation dilemma: here are some reasons that push us to see the price rush slow down quickly between now and the end of 2023

Inflation in the United States falls but less than expected, strengthening the likelihood of new substantial rate hikes by the Fed. For the meeting of 20-21 September there are those who go so far as to hypothesize an increase of 100 basis points compared to the 75 bp from the previous two meetings.

Inflation in August registered an annual + 8.3% in August compared to + 8.5% in July. The consensus was for a more marked slowdown to + 8.1%. The core component also jumped by 6.3% on an annual basis, strengthening compared to + 5.9% in July, over the estimated + 6.1%.

In the heat, markets reacted badly to the Inflation Report with the major Wall Street indices falling back about 2% on expectations of a Fed still aggressive in raising rates.

“Gasoline prices reduced headline inflation to 8.3% yoy, but it was a smaller-than-expected decline as housing, medical and vehicle prices raised the benchmark rate to 6, 3% from 5.9%. This firmly supports a 75bps rate hike next week and the market is now expecting a terminal rate in the 4-4.25% range, ”he comments. James Knightley, chief international economist di Ing.

What could slow down the price rush

At the same time, there are strong reasons for a sharp drop in inflation. “As the outlook for the housing market deteriorates, we expect house prices to fall over the next 6-12 months, which will help depress the rental components (which make up a third of the inflation basket),” argues Knightley, who he adds: “Meanwhile, supply chain improvements and lower used car prices will also be key factors helping to slow inflation next year. Add in weaker commodity prices, tight margins and the effects of dollar strength and we still see a strong possibility of inflation reaching 2% by the end of 2023 ”.

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