The economy of the United States of America is showing signs of easing inflation rates as consumer prices in the country slowed down during October 2022.
The latest data from Labour Department suggest that inflation in the United States grew at 7.7 percent (on a year-to-year basis) in the month of October. In September 2022, inflation was posted above the 8 percent level. Even though consumer prices have cooled down in the economy, the inflation rates are well above the target of the US Federal Reserve, which is to bring inflation under 2 percent.
The slowdown of economic activity and more cautious spending approach from consumers are said to be the major reasons why inflation is coming down in the US economy. Consumer prices excluding food and energy prices rose by 6.3 percent when compared to the previous year. Prices also increased by 0.3 percent in October when compared to September 2022.
The latest consumer price index data also suggests that US Federal Reserve will continue to focus on hiking interest rates in order to bring inflation under control. Hiking key interest rates are viewed as one of the most effective tools for controlling high inflation in the economy.
Various economists also predict that the continuous interest rate hike by Federal Reserve will push the US economy into a Recession by the next financial year. High-interest rates will make borrowing more costly for financial transactions. Purchasing automobiles, building large-scale infrastructure, and expanding businesses utilizing credit will become more expensive with higher interest rates. It will eventually result in a slowdown of economic activities.
Economic slowdown and contraction of Gross Domestic Product for multiple financial quarters will put the US economy in the midst of a Recession.
US federal reserve has so far hiked key interest rates by six times in the current financial year.
More addition of jobs in the economy and leveling of wages are positive signs for the federal reserve which is trying to bring down inflation in the economy without triggering a Recession.
Supply chain crises in the economy have also begun winding away as only the automobile industry is currently facing the issue with the availability of chips. Shipping costs have dropped back to pre-pandemic levels. The backup of cargo ships off the port of Los Angeles and Long Beach has been cleared.