Inflation continues to fall in the United States

The United States saw its inflation rate decline further in October compared to previous months. According to the US government, inflation was 7.7% year-on-year last month, down from 8.2% in September. As a result, consumer costs have fallen for four consecutive months.

For now, it looks like the peak is behind us. Inflation peaked in June at 9.1%, a 40-year high. The current figure of 7.7% is slightly below the expectations of economists, who predicted that inflation would come in at 7.9.

Excluding sharp fluctuations in energy and food prices, prices increased by an average of 6.3% over one year, compared to 6.6% in September. This figure was also lower than the 6.5% predicted by economists.

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For the Federal Reserve, the US central bank, the inflation figure is of great importance in determining whether interest rates need to be adjusted. The Fed has already raised its interest rates five times this year, four times with a record step of 0.75%. By raising interest rates, borrowing money becomes more expensive and less money is available, which should reduce the rise in prices. However, it usually takes several months before an interest rate hike begins to take effect.

Possibly lower interest rate tiers

Cooling inflation increases the chances that interest rates will not need to be raised as much in the future. The Fed will meet again in December to discuss interest rate policy. At the previous meeting earlier this month, central bank chairman Jerome Powell had already indicated that interest rates could be raised in small steps. He noted that the Fed would have to keep raising interest rates longer to bring inflation back to its 2% target.

Investors are reacting enthusiastically to lower inflation. Shortly after the start, the Dow-Jones index was 2.4% higher at 33,336 points. The broad S&P 500 gained 3.5% to 3,880 points and the Nasdaq Tech Gauge rose 4.9% to 10,855 points.