Although America has long been struggling with a severe inflation problem, it increasingly looks like it will resolve itself “silently,” according to De Jong. “The Federal Reserve doesn’t have to hike interest rates any further, so that gives some certainty. That way, Americans can get the inflation problem under control without a nasty recession.
More enthusiasm
If that were indeed successful, it would be a “pretty unique development,” according to De Jong. One that is also good news for the stock market. “The fact that there won’t be a bad recession and that interest rates won’t have to rise further is good for the stock market, which also leads to a decline in capital market interest rates.”
Due to these favorable prospects, the dollar is currently weakening, which happens more often when there is “more enthusiasm” in the world, according to De Jong. ‘Because the dollar may be supported by high US interest rates, but sometimes the dollar is also supported because people are afraid. When people become less scared, you often see the dollar weaken a bit.’
Import prices
There is a good chance that US inflation will continue to fall for the foreseeable future. According to De Jong, food prices will continue to fall, rental inflation has passed its peak and inflation has completely disappeared from producer prices. All this gives hope. “And the expectation is that today there will be a 6% drop in the prices of imported goods, and this will also push the data on consumer inflation lower in the coming months.”
According to the economist, the fact that the decline in inflation that has begun turning into a situation of negative inflation, or deflation, is not something we need to fear for the moment. Nor should we lose sleep over falling import prices. ‘They often fall, import and export prices are much more volatile than consumer prices. This will not result in deflation in the foreseeable future.’
Europe
Although Europe often follows the United States in terms of inflation development, Europe’s inflation problem is indeed “one degree worse” at the moment, according to De Jong. ‘Inflation started later for us and we had to deal with war and soaring gas prices. I think we will eventually follow America’s lead, but there is a significant time difference between them.”