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Lowest US inflation since 2021

The underlying inflation in the USA fell for the fourth month in a row in July, to the lowest level since 2021. This is a step in the right direction for the Fed to lower the interest rate, says Maria Landeborn, senior strategist at Danske Bank.

» Updated: 15 August 2024, 08:43

» Published: 14 August 2024

Lowest US inflation since 2021
Photo: Eduardo Munoz Alvarez AP/TT

New inflation figures from the USA strengthen the image that the USA's central bank may lower the interest rate next month.

Inflation according to the KPI measure fell to 2.9 percent in July from 3.0 percent in June, according to the USA's labor market department. The average forecast among analysts was 3.0 percent, according to a compilation made by Bloomberg.

It's positive that it comes a little below expectations. If it had been too low, it could have been interpreted as a decline in demand in the economy, says Maria Landeborn.

"Right direction"

The underlying inflation, which is the measure that the Fed primarily looks at and which excludes food and energy prices, landed at 3.2 percent. It is the lowest level since 2021.

According to Landeborn, the figures mean that the Fed will stick to its previous message that interest rates will start to fall after the summer.

This is a step in the right direction for the Fed to lower the interest rate. The market assesses that the chance is equally great for a double reduction as a single reduction, but I don't think they'll lower 50 points, I think it'll be 25 points. A double reduction would signal concern, and that's what they want to avoid, she says.

Moderate reaction

The rise on the Stockholm Stock Exchange increased marginally after the figures, and the dollar is stable at 10.42 kronor. Short-term market interest rates in the USA rose slightly, and Wall Street is rising in pre-trading.

The decline in inflation follows weak labor market figures from the USA that shook stock exchanges around the world last week.

Before the next interest rate meeting in September, the Fed will also have figures for inflation in August and new labor market figures to consider.

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By TTThis article has been altered and translated by Sweden Herald

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