America’s inflation fever may be breaking at last – The Economist

by | Dec 13, 2022 | Financial

“We will stay the course until the job is done,” said Jerome Powell, the Federal Reserve’s chairman, on December 14th, shortly after the central bank’s latest interest-rate rise. As a statement of intent, his words were both straightforward and utterly sensible. But what it means for the job to be done is becoming a matter of controversy. Inflation remains uncomfortably high. Meanwhile, the aggressive monetary tightening of the past year is only now filtering through to the economy, complicating assessments of whether the Fed has in fact done enough to rein in prices. Promisingly, after a difficult two years, inflation does appear to be easing its grip on the American economy. Overall prices increased by a mere 0.1% month-on-month in November, according to data published on December 13th, making for that rarest of recent occurrences: a downside surprise. Most encouraging was a breakdown showing that core inflation, which strips out volatile food and energy costs, had decelerated for a second consecutive month (see chart).Investors and analysts, scarred by America’s relentless run of inflation, have learned to restrain their hopes after a single month of rosy data. Year-on-year rates of inflation remain elevated at 7.1% for headline inflation. But the disinflation in November follows a similarly cheerful batch of data for October. Optimism is on the rise, albeit still mostly of the cautious rather than the unbridled kind. Since mid-October the s&p 500 index of leading American firms has recovered some of the ground it lost earlier this year. Concerns are shifting to the prospect of wea …

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