Forecasters expect inflation to cool slightly in October


Investors and consumers will be watching closely the release of October’s inflation data on Thursday, just over a week after the Federal Reserve intensified its fight to reverse inflation, most recently four decades ago.

The Fed raised its short-term interest rate an additional 0.75% last week, the latest in a series of massive increases in borrowing costs imposed by the Fed in recent months as it tried to curb price increases by cooling the economy and ask to slow down.

However, the approach threatens to plunge the US into recession and make millions out of work.

Economists expect inflation for the year ending October to fall to 7.9% – a very high value, but one that would mark a slight slowdown from the 8.2% year-on-year inflation rate recorded the previous month. was reported.

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The release of the data comes two days after the midterm elections, when Democrats outperformed forecasts of a voter backlash against the party that controlled Congress and the White House, partly due to frustration over skyrocketing consumer prices.

Polls released a few days before the election showed that 80% of likely voters viewed the economy as peaking when voting for Congress; while 77% specifically said the same about inflation, an TBEN News/Washington Post survey found.

Yet there were no Republican golf elections. On Wednesday, control of the House and Senate had yet to be determined.

Despite ongoing inflation, growing evidence suggests that the Fed’s rate hikes have held back some economic activity.

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Mortgage rates reached a 20-year high last month as the US faces an ongoing slowdown in home sales and construction.

Job growth has been strong, but shows signs of moderation.

The US added 261,000 jobs in October, exceeding economists’ expectations and demonstrating the continued strength of the labor market.

Federal Reserve Chair Jerome Powell holds a press conference in Washington, Nov. 2, 2022.

Elizabeth Frantz/Reuters

But October hires fell well below the typical jobs added in any given month in 2022. Monthly job growth has so far averaged 407,000 in 2022, up from 562,000 per month in 2021, the jobs data shows.

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While some data points to an economic slowdown, a government report released last month showed significant economic growth over three months ending in September.

US gross domestic product grew 2.6% over that period; By contrast, economic activity contracted by 2.2% in the first six months of the year.

However, inflation remains a major concern for federal policymakers.

When faced with high inflation, policymakers fear what is called a price-wage spiral, in which a rise in prices prompts workers to demand increases that help them pay for goods, which in turn pushes prices up, leading to into a self-perpetuating cycle of runaway inflation.

However, the October jobs data was the most recent to allay such concerns. Average hourly wages rose 4.7% last year, well below inflation and down from 5% year-on-year wage growth in the previous month.