US annual inflation slows to 8.3%

Consumer prices in the US in August rose by 8.3% in annual terms, writes Bloomberg, citing data from the country’s Ministry of Labor.

In July, annual inflation was 8.5%. A slight slowdown in August was primarily due to the maximum two-year decline (-10.6%) in gasoline prices.

At the same time, food prices increased by 11.4% in annual terms, and electricity prices – by 15.8%. These two indicators reached their maximum values ​​since 1979 and 1981, respectively. The cost of housing increased by 0.7% mom and by 6.2% compared to 2021, which was the highest value since the early 1990s.

The data released by the Ministry of Labor turned out to be higher than predicted and is likely to lead to another sharp increase in the base interest rate, Bloomberg believes. Higher inflation has already lowered President Joe Biden’s approval rating and is hurting Democrats’ chances of winning the November midterm congressional elections, the agency said.

At the end of August, the US Department of Commerce improved an estimate of a drop in GDP to 0.6% in the II quarter. The department attributed the decline in GDP to a reduction in private investment in inventories and fixed capital, as well as spending by the federal and local governments. These data, wrote Bloomberg at the time, testify to a sharp slowdown in US economic growth in the first half of the year.

July 27 US Federal Reserve announced on raising the base interest rate by 75 basis points to 2.25-2.5% per annum. This rate increase was the fourth in the last six months. In March, for the first time since 2018, the regulator raised the rate by 0.25 percentage points to 0.25-0.5% per annum. The next increase took place in early May – immediately by 0.5 percentage points to 0.75-1%. The last time the Fed raised the rate was on June 15 by 75 bp. p. – up to 1.5-1.75% per annum. This was the biggest increase since 1994.

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