US inflation brings the long-awaited "positive surprise"
In the USA, the rise in consumer prices continues to slow. Hardly anyone on the stock markets now sees any reason for the US Federal Reserve to tighten interest rates again. The scenario of low inflation and stable growth is causing a buying frenzy.
Inflationary pressure in the USA eased noticeably in October, scaring off fears of interest rate hikes on the financial markets. The rate of inflation fell from 3.7 to 3.2 percent, according to the Department of Labor in Washington. Economists had only predicted a fall to 3.3 percent. On the stock markets, investors fired up the turbo and filled their shopping lists. "This is the positive surprise that the market has been longing for," said Thomas Altmann from QC Partners: "For the first time this year, prices stagnated month-on-month,
In Frankfurt, the German stock market barometer DAX rose by 1.8 percent to 15,614 points. The upswing on the German market was led by the so-called fallen angels, i.e. shares that had suffered particularly badly from rising interest rates. The Euro-Stoxx-50 rose by 1.4 percent to 4292 points. Yields on the bond market fell and the US dollar weakened significantly. Investors on Wall Street were also in a buying mood. "These figures indicate that the Fed has nothing more to do in terms of monetary policy," said Thomas Hayes from private equity firm Great Hill Capital. The central bankers had achieved their goal - a slowdown in inflation and a cooling labor market without the economy weakening too much.
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For the US Federal Reserve, consumer prices are an important benchmark when setting its interest rate course. It wants to push the inflation rate down to the target level of two percent and, after a series of increases, has recently kept interest rates stable in the range of 5.25 to 5.50 percent at two meetings in succession. On the futures markets, the probability of a further increase is now estimated to be very low at just under ten percent. It is also expected that interest rates are likely to be cut from May onwards.
Expert: Housing is the last price driver
"From the Fed's point of view, developments are probably heading in the right direction," said Helaba economist Ulrich Wortberg. However, the all-clear cannot yet be given, as the Fed's inflation target has not yet been reached. The monetary authorities are also paying particular attention to so-called core inflation, which excludes the volatile prices for energy and food. This rate fell surprisingly in October - to 4.0 percent. Experts had expected it to level off at the September figure of 4.1 percent.
Even though the central bank has recently paused, it has left the option of a further interest rate hike open. However, Fed Chairman Jerome Powell also signaled that the central bank could now act more cautiously after its aggressive series of hikes.
"Today's inflation figures take further pressure off the Fed, especially the fact that the slight acceleration in core inflation seen in August and September has not continued," according to the analysis of Commerzbank economists Christoph Balz and Bernd Weidensteiner.
According to LBBW economist Dirk Chlench, a closer analysis of the latest figures reveals that the inflation rate amounts to just 1.5 percent after excluding the housing component: "This illustrates that housing costs are the last remaining price driver." As the decline in house prices and the stagnation of asking rents suggest that the upward pressure on housing prices should ease, the inflation rate could fall to 2.0% within twelve months. This would then be a precision landing for the Fed.
The positive surprise in US inflation rates, with consumer prices stagnating for the first time in 2022, has led investors to believe that the Federal Reserve may not need to adjust its interest rate policy anymore. Central banks worldwide closely watch inflation rates, including the US Federal Reserve, which aims to bring inflation down to its 2% target. With the current interest rate range of 5.25 to 5.50%, the prospects of further increases are low, and some experts predict possible interest rate cuts starting from May.
Source: www.ntv.de
