The inflation rate in America fell for the seventh straight month. Macroeconomist Edin Mujagic calls this “good news” after last year’s hikes. However, it’s important not to celebrate too soon and keep a close eye on monthly developments, says Mujagic: “We have now entered slow-motion inflation.”
The drop in inflation isn’t much, according to Mujagic, but it’s a good sign that the downward trend is continuing. At the same time, monthly developments paint a different picture. ‘We saw a decline in December last year, but it was only half a percentage point higher in January. Ultimately, this is a considerable increase on a monthly basis,’ explains the macroeconomist.
‘sticky inflation’
If this trend continues, annual inflation of six percent will be reached, according to Mujagic. “And that’s miles below the 2 percent the Fed is aiming for.” So there’s no clear picture that inflation in America is coming down very fast. According to the macroeconomist, the fact that the number remains on the high side means that the Fed must continue to raise interest rates for now.
The phase we have now entered is a phase of ‘slow-motion inflation’, says Mujagic: ‘We are emerging from a period of high inflation caused by energy prices. That effect is now diminishing and that’s why we have to look at sticky inflation.’ According to the macroeconomist, this is the part of inflation where prices have historically been known to change very slowly. “That gives a good picture of where inflation is going and you can see that inflation is slowly picking up.”
Falling house prices
Yet there is also hope according to Mujagic, because it improves when you look at the overall inflation rate in the United States. A third of that figure is the cost of the house, so it’s on the high side. What US house prices do then translates into that part of the inflation rate, the macroeconomist knows.
House prices are slowly going down. If we forget the current rate of inflation, there’s a good chance that before we can think about the summer holidays, inflation in the US will be significantly lower,’ Mujagic suspects. “Then the door opens for the Fed to think they’ve had enough of all those rate hikes since March and then they decide to call it quits.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
