Inflation in the United States is slowing, while the Fed has entered a rate-cutting cycle, forecasting inflation of 2.3% by the end of 2024.
In the United States, the year-over-year PCE (personal consumption expenditure) index increased by 2.2% last month, compared to 2.5% in July. On a monthly basis, it increased by 0.1%, after increasing by 0.2% in July.
The underlying inflation index, the “core PCE”, which excludes volatile items such as energy and food, increased by 0.1% in August, after increasing by 0.2% in July .
Over one year, this index reached 2.7%, compared to 2.6% in July, while economists’ forecasts were counting on an increase of 0.2% over one month and 2.7% over one year.
At the same time, the rise in prices is accompanied by a slowdown in consumer spending by American households. These increased by 0.2% last month, after an increase of 0.5% in July.
The Fed embarks on the path of lowering rates
Faced with this situation, the American Central Bank anticipates inflation of 2.3% by the end of 2024 and 2.1% by the end of 2025, compared to previous forecasts of 2.6% and 2.3% respectively. It plans to return to its target level of 2.0% in 2026.
This slowdown led the Fed to lower its rates by half a percentage point, a first since 2020, to between 4.75% and 5.00% on September 18.
Jerome Powell, Chairman of the Fed, said: “This decision reflects our growing confidence that with appropriate recalibration of our policy, labor market strength can be maintained in an environment of moderate growth and inflation. in a lasting decline towards 2%.”
The monetary institution is also considering a further reduction in its rates by a total of 0.5% by the end of 2024, while in June it was considering lowering rates only once, by a quarter of a point. .
As a reminder, the Fed had raised its rates to 5.25% to 5.50% to try to curb the surge in prices.
Jihen Mkehli
Published on 09/30/24 11:34
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