Nobody expected the Federal Reserve to be able to crack down on inflation quickly. But after seven months of rapidly rising interest rates, the central bank has just made a breakthrough.
A look at the September consumer price data shows that the US is not in a much better economic situation than it was in March when the Fed began its aggressive monetary tightening. Hence, general consumer prices rose 8.5% year-on-year. They are now up 8.2%.
Core prices, which exclude food and energy volatilities and are widely seen as a more reliable barometer of core inflation, rose to an annualized 6.6% in September, the highest level since 1982.
“This inflation report was a real disaster,” wrote Christopher S. Rupkey, chief economist at Fwdbonds, a financial market research firm, as quoted by CNN. “It shows that whatever Fed officials are doing, it just isn’t working.”
The Federal Reserve has planned to remove inflation from the US economy by any means necessary, by implementing massive interest rate hikes in hopes of reducing the demand for goods and services.
However, despite rising interest rates, there are few signs of price weakening. However, the Fed is determined to pursue the same policy, betting that a strong US labor market can withstand the stress of higher funding costs.
Expectations are that at its next meeting in early November, the Fed will undertake another 0.75% rate hike. Investors estimate a 97% chance of a fourth consecutive three-quarter percentage point increase.
