Inflation higher than expected: US inflation rate falls to 8.3 percent

Consumer prices in the US rose by 8.3 percent in August compared to the previous year. Although the inflation rate was higher than expected, the upward wave in the US appears to have broken.

The high inflation in the USA fell only slightly in August. The inflation rate for goods and services fell to 8.3 percent from 8.5 percent in July, the Labor Department in Washington said. Economists had expected inflation to fall, but had averaged a lower rate of 8.1 percent. The so-called core rate excluding energy and food prices was also higher than expected at 6.3 percent.

Still, the data could suggest that the US is already past the inflation peak. Inflation reached 9.1 percent in June, the highest level since 1981.

Another big rate hike expected

The US Federal Reserve (Fed) recently fought high inflation with two unusually sharp interest rate hikes of 0.75 percentage points to a range of 2.25 to 2.50 percent. For the September 21 session, most observers expect another such move. “Further interest rate hikes will be necessary by the end of this year in order to bring the inflation rate down significantly and consistently,” says economist Bastian Hepperle from Bankhaus Hauck Aufhäuser Lampe.

However, the resolute action taken by the American currency watchdogs is fueling concerns that the central bank could stall the economy and trigger a recession. Accordingly, the stock markets initially came under pressure.

Inflation in Europe still before the peak

In Europe, a further increase in inflation is expected in view of the energy crisis. Because energy suppliers will increasingly pass on their electricity and gas prices to consumers, especially at the beginning of 2023, the Munich-based ifo Institute expects inflation to rise further to eleven percent in Germany by early 2023.

The divergent price development between the USA and Europe had recently given the euro a boost. However, the unexpectedly high rate caused the common currency to slide back significantly towards parity with the dollar after the data was published,