According to the PCE index, the Fed's preferred measure, inflation fell further in the United States in January, although with a recovery within a month, while the issue of prices is central in the race for the White House.
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Consumer price inflation fell as expected to 2.4% year-on-year in January, compared with 2.6% in December, according to the PCE index released by the Commerce Department on Thursday.
But within a month, the increase accelerated to 0.3% compared to 0.1%. However, analysts expected a fairly strong increase and, according to the Market Watch consensus, expected +0.4%.
The PCE index is the inflation measure favored by the American central bank Fed, which wants to reduce its increase to 2%, a target that it wants to achieve by 2026.
Inflation is “getting closer to the target,” stressed Rubeela Farooqi, chief economist for high-frequency economics, not worrying about this recovery over a month.
Excluding volatile food and energy prices, so-called core inflation slowed slightly over a year to 2.8% compared to 2.9% in December, but accelerated more sharply to 0.4% over a month from 0 ,1 %.
Another measure of inflation, the Labor Department's CPI index released two weeks earlier, disappointed as its increase slowed significantly less than expected and remained above 3% (3.1%).
First interest rate cut in June?
Eggs, cars, insurance, housing… The rise in prices is having a serious impact on the wallets of American consumers.
The issue is very lively in the presidential campaign ahead of November's election, in which current Democratic President Joe Biden is expected to face his Republican predecessor Donald Trump.
The inflation curve is also closely watched by the Fed, which has been fighting its rise for more than two years. The central bank's main tool to address this issue was to raise interest rates between March 2022 and July 2023. This pushed them to the 5.25% to 5.50% range, the highest level in 20 years.
This strategy aimed to specifically slow down economic activity by making loans more expensive so that households consumed less and prices did not rise further.
The Fed plans to start cutting interest rates later this year. But officials have warned that they would prefer to wait several months to ensure that inflation is unlikely to rise again.
These back-to-back comments had disillusioned markets, which were dreaming of a first rate cut at the next Fed meeting on March 19-20. From now on, according to the CME Group, they are primarily counting on the meeting in mid-June.
“PCE inflation has not risen as much as other (inflation) measures, … suggesting that the Fed could begin long-awaited rate cuts this spring or early summer,” points out Navy Federal economist Robert Frick Credit Union.
Stock market income
The Commerce Department also said household income rose 1% in January compared to December, while their spending rose just 0.2% compared with 0.7% in December, the month of year-end purchases Holidays were driven.
The strong rise in income is due in particular to “solid dividend income that reflects the solid performance of the stock market” as well as the annual reassessment of federal benefits, including retirement, explains Gregory Daco, chief economist at EY Parthenon.
However, this increase was mitigated by a tax increase, he explains, “so that disposable income increased by a more modest 0.3%” and even “remained stable” when adjusted for inflation.
“Overall, the data suggests that the economy continues to grow and inflation is gradually falling,” added Rubeela Farooqi.
Inflation is also falling across the Atlantic. In France, for example, it fell below 3% year-on-year in February for the first time in two years, according to data also published by INSEE on Thursday.
And the European Central Bank (ECB) is also expected to cut its interest rates in the coming months.
