Home Politics Inflation comes to the USA: it’s highest since 1981

Inflation comes to the USA: it’s highest since 1981

In the US, prices have exploded in recent months. In April, prices rose by 0.8 percent, bringing us annual inflation to 4.2 percent. So far, the Fed has always said not to raise interest rates before 2024. But analysts think the Fed will have to act sooner if the trend continues.

In advance, analysts had anticipated an inflation rate of 0.2 percent in April. That’s 0.8 percent. For core inflation 0.3% was foreseen. That’s 0.9 percent. This is the highest inflation rate since September 2009. Core inflation (without energy and food prices) has not even been this high since 1981.

Second-hand cars in particular became more expensive in April. Their prices rose by 10 percent. New cars became 0.5 percent more expensive. Holidays also became considerably more expensive: 0.9 percent. Commodity prices rose 1.1 percent. Food became 0.4 percent more expensive and Energy fell in price.

James Knightley, chief economist at ING, believes that inflation will continue to rise to 4.5 percent year-on-year in May. But in the third quarter, inflationary pressures will decrease. ‘The Fed thinks inflation will eventually stabilize at around 2 percent’. Current inflation is a temporary phenomenon, so the interest rate weapon does not have to be used.

Increased prices for raw materials and semi-finished products are the main cause. But the high inflation is also caused by president Biden’s stimulus program. Supply cannot keep up with demand, which puts pressure on prices. In addition, many parents are forced to stay at home because children cannot go to school. This also threatens labor market deficits.

The Dow, the stock index on the New York Stock Exchange, fell by 200 points on Wednesday, or a 0.5 percent. Rising interest rates make stocks less attractive. Bond prices also went down. The dollar, on the other hand, became more expensive against the euro

About the author: John Campbell

John Campbell is the godfather of Polimedia and the oldest author from the whole team. His occasional guidance is crucial for everyone he advises.

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