The wave of inflation in the USA is apparently continuing unabated. As the Bureau of Labor Statistics announced on Thursday in Washington, the inflation rate climbed 7.5 percent in January to its highest level in 40 years. It thus exceeded the December value by half a percentage point and also increased significantly more than experts had already feared. Energy sources such as petrol and gas in particular became more expensive in January, costing 27 percent more than twelve months earlier. Food prices also rose sharply again.
In view of the latest figures, the US Federal Reserve should feel confirmed in its plan to raise its key interest rate again for the first time since December 2018 at the next meeting of the monetary policy committee in mid-March. More and more experts are assuming that the monetary watchdogs could raise the so-called overnight money target range by half a percentage point to 0.5 to 0.75 percent, contrary to the original plan, instead of by a quarter. Since the start of the corona pandemic almost two years ago, the key interest rate has actually been zero percent.
According to calculations by the rating agency Moody’s, the high inflation rate costs an average US household around 250 dollars per month. However, the price shock hits individual social groups with varying degrees of severity, as a study by the major bank Wells Fargo revealed: tenants suffer more than homeowners, and middle-aged people have to struggle more financially than pensioners, given other consumer needs. On average, people with a Latin American immigrant background have to spend significantly more money on used cars and gasoline than many Asian American citizens, who often earn more and live closer to their offices.
On the stock exchanges, the dollar appreciated while share and bond prices fell. The yield on ten-year US government bonds exceeded the two percent mark for the first time since 2019 in anticipation of a significant rise in key interest rates. As a result, it is likely to become noticeably more expensive for the US government to borrow on the financial markets to cover budget deficits.
Experts also said it was worrying that the recent price surge was not limited to highly volatile areas such as energy and food. Rather, the trend is getting broader, it was said. In January, for example, the prices for medical services rose unexpectedly sharply. This is important because the sector in the so-called PCE deflator – the inflation barometer that the Fed gives most weight to in its interest rate decisions – has more weight than the now published and better known consumer price index.