The president of the United States, Joe Biden, celebrated last week that, for the first time since he occupies the White House, the price of gasoline is cheaper than a year before.
The price of fuels has allowed year-on-year inflation to fall in November for the fifth consecutive month, to 7.1% from the maximum of 9.1% set in June.
Although the pressures on prices have not disappeared and part of the year-on-year decline is due to the base effect (the sharp rises from a year ago), the respite will allow the Federal Reserve to slow the pace of interest rate rises.
The committee that sets the central bank's monetary policy is summoned just this Tuesday to begin a two-day meeting after which it will set the price of money at the highest level since 2007. After four consecutive rises of 0.75 points, the expects the Reserve to announce a 0.50 point hike this Wednesday, as its president, Jerome Powell, recently anticipated.
It will, yes, be the seventh rise of the year, with which interest rates will have gone from a level close to zero to the range of 4.25%-4.50%.
The price data for this Tuesday, with a monthly rise of 0.1% and a drop in year-on-year inflation to 7.1%, is the second to be published since the previous monetary policy meeting.
After the positive surprise of the decline in inflation to 7.7% in October, the market was expecting 7.3% this month, while for core inflation, which excludes energy and food, the forecast was for it to go from 6.3% in October to 6.1% in November, but it has fallen somewhat more, to 6.0%.
The year-on-year rate is the lowest since 7.0% at the end of last year.
In any case, core inflation shows that the battle against price increases will still be a long one.
In addition, the labor market continues to be robust, with a rate of job creation higher than what the central bank considers compatible with the price stability objective of 2%.
The unemployment rate is close to the lowest in the last half century.
The economy generated 263,000 non-agricultural jobs in the month of November and the country has seen an uninterrupted increase in employment for 23 months in the heat of the recovery from the pandemic, and continues to generate jobs above the level that the central bank considers appropriate in this moment.
The chairman of the Federal Reserve pointed out on November 30 at a conference at the Brookings Institution in Washington: “The full effects of a rapid tightening [of monetary policy] have not yet been felt so far, so it makes sense moderate the pace of our rate hikes as we approach the level of tightening that will be enough to bring inflation down.
The time to moderate the pace of rate hikes could come as soon as the December meeting.”
Powell, however, cautioned that this is less important than how far the Federal Reserve will have to raise rates to control inflation and how long it will take to keep them high.
“Re-establishing price stability is likely to require keeping monetary policy tight for some time,” he said.
For this reason, many of the eyes of investors and analysts this Wednesday will be set not so much on the rise of 0.5 points, which is taken for granted, as on the projections that the members of the monetary policy committee make about the evolution of the economy, inflation, unemployment and, above all, interest rates.
Rate forecasts are estimates only, not commitments at all.
Even less so when the FOMC, the committee that sets monetary policy, changes its composition somewhat with the new year.
But all the analysts expect an upward revision of the previous projections, set in September.
Powell, in fact, has already anticipated that rates will probably reach "somewhat higher" levels than expected in September, when a ceiling of around 4.5%-4.75% was expected.