The United States begins to win the battle against inflation.
The aggressive rises in interest rates by the Federal Reserve have cooled demand and this has been coupled with the decline in oil prices in international markets.
With this, inflation closed 2022 at 6.5%, according to the December data published this Thursday by the Bureau of Labor Statistics.
This is the sixth consecutive drop in the year-on-year rate and brings inflation to its lowest since October 2021. With the new data, the central bank will be able to continue slowing down the pace of rate hikes, as it did at the last meeting of its committee of monetary policy.
Prices, in fact, fell 0.1% monthly in December, thanks to cheaper gasoline, which even recorded a drop of 1.5% year-on-year.
For the first time in a long time, filling the tank of the car is cheaper than a year before.
Core inflation, which excludes energy and food prices to be consumed at home, has also fallen, although it has done so more slightly.
It has gone from 6.0% in November to 5.7% at the end of the year.
The rise in food prices slows down, but still continues at very high rates.
Buying to eat at home has risen 11.8% in the last 12 months, while food outside the home has become more expensive by 8.3% year-on-year.
In December plane tickets have become cheaper, partly thanks to the drop in fuel prices, and the price of cars has also fallen, especially second-hand ones.
The new data is also a reprieve for the president of the United States, Joe Biden, whose popularity has been especially damaged by the price increases.
The White House has included in the president's agenda for this Thursday an intervention by Biden on the economy and efforts to deal with inflation to take advantage of the publication of favorable data.
The lower price of gasoline since the highs prior to the summer explains a good part of the drop in inflation.
The rate of rise in prices is still well above the price stability objective set by the Federal Reserve, which stands at 2%, but this is a relief for its president, Jerome Powell.
In addition, it is added to a moderation in the rate of wage increases, according to data published last week, which monetary managers are watching very carefully to prevent a spiral of prices and wages from occurring that causes inflation to become entrenched. more than desired.
In the last six months, inflation has come down from 9.1% in June.
It is not even halfway down to the central bank's target yet.
For this reason, the monetary policy committee plans to continue raising interest rates and keep them high for as long as necessary.
In a speech delivered this week, Powell has sung the benefits of the independence of the Federal Reserve: “Price stability is the foundation of a healthy economy and provides the public with immeasurable benefits over time.
But restoring price stability when inflation is high may require actions that are not popular in the short term, as we raise interest rates to slow down the economy.
This Thursday's data, however, supports the thesis that rate hikes will occur at a slower pace than up to now.
After four consecutive increases of 0.75 percentage points, the Federal Reserve considered in December that it was necessary to stop and see how the tightening of monetary policy unfolds its effects and decided to approve a rise of 0.5 points, up to the range of 4 .25%-4.5%.
“We think this week's reading for core consumer price index inflation will cement another step lower in the pace of Federal Reserve tightening.
After raising 50 basis points (bp) at the December meeting, we expect the Fed to move to a 25bp rate of rise in early February, ultimately pausing around 5%,” say economists Tiffany Wilding and Allison Boxer of fixed income giant PIMCO.
With unemployment at 3.5%, the lowest rate in half a century, the central bank is still trying to navigate the narrow path that would allow it to avoid a full-blown recession and achieve the long-awaited soft landing for the economy.
Most economists see a recession as likely, but they also expect it to be mild and do not rule out that the United States will manage to avoid it, given the strength of the labor market.
Faced with the shortage of labor and the difficulties to hire, companies are thinking twice before laying off their employees, as they did at other times when demand began to fall, reinforcing the recessive dynamics.