US inflation data offers hope, says macroeconomist Edin Mujagic. “The whole world was looking forward to it and the world is more or less happy with the numbers.”
That joy is easy to explain. Not only has inflation in the US fallen from 6% last month to 5% last month. “That’s good news in a context of very high inflation,” he says, noting that the figure is year-over-year. “If you look at the month-to-month, which gives a better picture, it also gives hope.” And although core inflation has risen slightly to 5.6 percent, he thinks it shouldn’t have a name.
“It’s good news in a context of very high inflation”
But there is a problem, even Mujagic admits. In calculating the percentage, the US Federal Reserve used the help of mathematics. Mujagic points out that the decline is “very clearly” the result of the large difference in the year-on-year data. ‘This effect will fade in the coming months.’
Good news
And that’s bad news, thinks Mujagic, but it’s not all bad news. As the Fed started raising interest rates in the spring of 2022, the effects are now slowly being felt. Therefore, Mujagic believes that core inflation will also continue to decline in the coming months.
Additionally, the job market is cooling down and this combination provides a significant windfall for the Fed.” They have indicated very clearly over the last few months that if there are any significant developments in those areas, there will be room to stop rate hikes soon. “Mujagic said. And if you look at the Fed meeting minutes – which were released yesterday – expect the effects of the rate hikes to start to kick in. So I wouldn’t be surprised if they decide at their next meeting that that will be the last rate hike of 2023.’
Source: BNR
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