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Consumer prices: US inflation rises to 40

2022-04-12T17:35:35.765Z


Higher prices for gas, rent and groceries are also hitting consumers hard in the US. Inflation is at its highest level since late 1981, putting further pressure on the Fed to raise interest rates.


Enlarge image

Gas station in Washington DC: As in Europe, fuel prices have recently risen sharply in the USA

Photo: Chip Somodevilla/Getty Images

Consumer prices in the USA increased even more in March than in Germany.

The inflation rate rose by 8.5 percent compared to the same month last year, as announced by the US government.

This is the highest inflation rate since the end of 1981, i.e. for a good 40 years.

In the previous month, the rate was 7.9 percent.

The high inflation rate is increasing the pressure on the US Federal Reserve (Fed) to raise interest rates even faster.

The persistently high rate of inflation around seven months before the important congressional elections is also a major challenge for US President Joe Biden and his Democrats.

In Germany, the annual inflation rate rose to 7.3 percent in March, fueled by massive increases in energy prices.

The Federal Statistical Office confirmed this estimate and justified it, among other things, with the sharp increase in the price of heating oil. According to the statisticians, they have more than doubled with an increase of 144 percent.

But fuel and food – including cooking fats and oils in particular – also became noticeably more expensive.

Fuels particularly responsible for inflation

In the US, on the other hand, the biggest price drivers in March were fuel, rents and groceries.

Gasoline prices alone rose 18.3 percent month-on-month, accounting for more than half of the increase, the new data showed.

The rapid rise was mostly explained by the Russian war of aggression in Ukraine, which pushed up oil prices.

Gasoline prices in the USA fell again slightly in April.

The prices of other energy sources also increased significantly in March.

Groceries became ten percent more expensive.

Core inflation, i.e. excluding food and energy prices, rose by a still very high 6.5 percent year-on-year.

A key driver of higher core inflation has been rising housing costs, which rose 5 percent year-on-year - the biggest increase since 1991.

The Fed's medium-term inflation target of two percent has been significantly exceeded for some time.

The central bank has already hinted that it will tighten its monetary policy considerably.

Many analysts therefore expect the key interest rate to be raised by 0.5 percentage points to a range of 0.75 to 1 percent at the next meeting of central bank decision-makers in early May.

On the financial markets, interest rate hikes totaling more than two percentage points are expected for this year alone.

In addition, the Fed wants to rapidly shrink its trillion-dollar balance sheet soon, which would drain further liquidity from the markets.

Increases in the key interest rate slow down demand.

This helps bring down the rate of inflation, but it also weakens economic growth.

It is therefore a balancing act for the central bank: it wants to raise interest rates so much that inflation is slowed down – without stalling the economy and the labor market at the same time.

The Fed is committed to the goals of price stability and full employment.

The US economy is now booming again, with the unemployment rate recently falling to a low 3.6 percent.

Many companies are already complaining about a shortage of workers.

apr/dpa

Source: spiegel

All business articles on 2022-04-12

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