Inflation slowed as expected in the United States in May. The increase in prices stood at 2.6% over a year, after 2.7% in April, according to the PCE index, favored by the American central bank (Fed), and published Friday by the Commerce Department.
Prices were unchanged over the month, with the inflation rate at zero, compared with 0.3% the previous month. This measure of inflation is moving in the same direction as the CPI index, published earlier in the month and to which pensions are indexed. This index showed a slowdown to 3.3% over the year and had fallen to zero over the month.
The New York Stock Exchange opened slightly in the green on Friday, welcoming this expected slowdown. In early trading, the Dow Jones index advanced 0.12%, the Nasdaq, with a strong technology bias, gained 0.07% and the S&P 500 rose 0.11%.
Before the publication of the index, the dollar was hesitant this morning. Around 9:25 GMT (11:25 in Paris), the greenback was slightly up against the single currency, which was down 0.06% at $1.0695, and remained almost stable against the British currency, which was down 0.01% at $1.2638.
The Fed could finally lower its rates
« The inflation context is evolving favourably and, associated with a more moderate evolution of household spending and growth, favours a shift in monetary policy towards a less restrictive orientation, perhaps as early as September. », commented Rubeela Farooqi, chief economist for High Frequency Economics.
That is to say, the Fed could finally lower its rates, which have been at their highest level since 2001 for almost a year, to the range of 5.25 to 5.50%. This would make credit less expensive for households and businesses. The Fed had warned, during its last meeting in mid-June, that it would need to observe several months of falling inflation for the rate reduction to be launched.
Its president, Jerome Powell, notably estimated that the rise in wages, which is good news for Americans’ wallets, remains too high to allow a return of inflation to an acceptable level.
United States: Fed maintains rates and expects only one cut in 2024
On Tuesday, Fed Governor Michelle Bowman, quoted in the Financial Timeshad declared that she remained “ willing to increase » again borrowing costs « if the progress in inflation were to stop or even reverse » in the United States, that is to say if the rise in prices stagnated or accelerated again.
Other U.S. data released Thursday was mixed. U.S. GDP growth in the first quarter of 2024, although revised slightly upward to 1.4% annualized, from 1.3% previously, confirms the slowdown in activity compared to the 3.4% recorded in the last quarter of 2023.
Trump and Biden pass the buck on inflation
On Thursday, Donald Trump accused Joe Biden of being the cause of inflation, which he said “ tue ” United States. Joe Biden did a bad job. And inflation is killing our country “, affirmed the Republican billionaire during the first debate of the November presidential race against the Democratic incumbent. “ It caused inflation. I left him a country with almost no inflation, it was perfect “, Donald Trump further lamented.
However, many economists believe that the former president’s program risks, if he returns to the White House, causing prices to soar again.
A sign of its importance, the question of rising prices which have reduced the purchasing power of Americans since 2021 opened the debate between the two candidates, organized in Atlanta, Georgia. Joe Biden accused his predecessor of having “ really decimated the economy. That’s why there was no inflation ». « We are working to lower the prices of products on the kitchen table, and we are going to achieve this. », assured the democrat.
(With AFP)
