Economy: Rebound in inflation in the United States, the new figures are worrying

American inflation, which had shown signs of easing in recent months, is starting to rise again, which once again puts the question of the cost of living at the center of national concerns. In October, the inflation rate reached 2.6%, compared to 2.4% in September, which represents a turnaround in the fierce struggle to stabilize prices. This return of inflation occurs in a fragile economic context, where each variation in price indices is scrutinized for its potential impact on purchasing power, monetary policy and the political scene.

Rising inflation and its main causes

In October, inflation in the United States rebounded, despite the unexpected return of money printing, with an annual rate of 2.6% according to data from the Department of Labor. This return to growth, after several months of stabilization, was mainly driven by the increase in costs in the housing sector. The department specifies that “more than half of the increase over one month” comes from this category of expenses. In addition, it highlights the considerable weight of housing in American household spending. This monthly increase of 0.2% follows that of the previous month, which confirms a trend which could have a lasting impact on household budgets.

For the Biden administration, this increase constitutes a significant challenge, as expressed by Lael Brainard, the president's principal economic adviser. “We will continue to fight to reduce costs for families in key areas, like housing and health care,” she said. The objective remains clear: relieve families and avoid policies that risk compromising current efforts to control inflation. Thus, the reaction of the stock market was cautious, with a slight increase recorded on Wall Street, the Dow Jones which rose by 0.15% and the Nasdaq by 0.13% at the start of the session.

The political dimensions and outlook for inflation

This resumption of inflation in the United States is also having repercussions on the political sphere, in particular with the return of Donald Trump, who seized the subject to criticize the economic policy of the Biden administration. The surge in prices since 2021, with nearly 20% for basic necessities such as eggs and gasoline, had become one of the main arguments of the president-elect's campaign. Trump has promised lower inflation through protectionist measures, although UniCredit economists estimate his tariff hikes could instead add 1.3 percentage points to annual inflation. Samuel Tombs, chief economist for Pantheon Macroeconomics, even warns that “Donald Trump's economic policy agenda threatens to prevent inflation from returning to the Fed's 2% target.”

For the crypto market, sustained inflation in the United States could increase interest in alternative assets, often seen as safe havens against currency devaluation. High interest rates, however, could affect liquidity in the crypto market, decreasing investment flows into risky assets. However, if inflation remains sustainably above the Fed's target, investors could turn to Bitcoin and other cryptos to diversify their portfolios in the face of a weakening dollar.

Ultimately, this rebound in inflation could weigh on the monetary strategy of the United States in the months to come, which impacts both political decisions and the daily lives of Americans. As the Fed adjusts its policy, the question of purchasing power continues to fuel debate and could redefine the country's economic and political priorities in the near future.

Luc Jose A.

A graduate of Sciences Po Toulouse and holder of a blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I took the commitment to raise awareness and inform the general public about this constantly evolving ecosystem. My goal is to enable everyone to better understand blockchain and seize the opportunities it offers. I strive every day to provide an objective analysis of current events, to decipher market trends, to relay the latest technological innovations and to put into perspective the economic and societal issues of this ongoing revolution.