New York stock markets tumbled Thursday after a disappointing US inflation figure. US government data showed that consumer prices rose 8.2% in September. It was more than economists expected. They were counting on a cooling of inflation to 8.1%, from 8.3% in August. Investors were hoping for a marked slowdown in inflation. This would mean that the US Federal Reserve would not have to raise interest rates as much in the future.
Excluding strongly fluctuating energy prices, annual inflation even rose to 6.6%. In August, this so-called core inflation was still 6.3%. This is the highest level since 1982, according to data from the United States Department of Labor.
interest
The inflation rate is of great importance to the US central bank. The Federal Reserve has already raised interest rates four times this year to fight high inflation and bring it back to the 2% target. In the last three interest rate decisions, interest rates have even been raised by 0.75 percentage points. The last time the Fed raised rates at such a pace was four decades ago under then Fed chief Paul Volcker.
Fear of the recession
Investors had hoped inflation would cool more sharply, so the Fed may not need to raise interest rates in the future. Earlier this month, however, it emerged that the US job market is still very strong, which also gives the Fed more room to continue to drastically raise interest rates. The Fed has also repeatedly stated that it is “determined” to bring inflation back to its 2% target. According to Fed Chairman Jerome Powell, with the current political stance, this is possible and the central bank “will keep it until the job is done”.
At the next interest rate meeting in early November, the Fed is expected to raise interest rates again by three-quarters of a percentage point. Those interest rate hikes are feared to trigger an economic recession.
Biden
Cooling inflation would have been a boost for US President Joe Biden. His popularity is under pressure due to the rising cost of living in the United States. Mid-term elections will be held in the United States on 8 November. Biden has indicated that he will make a decision after those elections if he runs for the presidential election of 2024.
In an initial response to the figures, the Democrat said Thursday that there is “still work to be done” in the fight against rising inflation. That fight has top priority, according to the president.
Stock market
Wall Street fell heavily on Thursday after disappointing inflation. Shortly after opening, the Dow-Jones index fell 1.8% to 28,690 points. The broad S&P 500 fell 2.3% to 3,494 points and the Nasdaq tech indicator fell 3% to 10,098 points.
Read also: US interest rate hike: what does it mean for savers and investors? “Rising interest rates are poison for the stock market” (+)
See also: Inflation at its highest level for 47 years
Unlimited free access to Showbytes? Which can!
Log in or create an account and don’t miss any of the stars.
