Daily Brief: US Inflation Might’ve Peaked, So The Fed Will Be Heaving A Sigh Of Relief

Daily Brief: US Inflation Might’ve Peaked, So The Fed Will Be Heaving A Sigh Of Relief

over 2 years ago3 mins

Data out on Tuesday showed US inflation rose less than expected in August, and there are signs it might all be downhill from here.

What does this mean?

There are a cocktail of factors behind America’s rising prices this year: pandemic-related bottlenecks, a sudden rebound in demand, and ongoing government support programs that have more-or-less constantly been pumping cash into the economy. All told, it’s driven consumer prices 5.3% higher in August than the same time last year.

But here’s the thing: that rise is down from July’s 13-year high of 5.4%, while the “core” inflation measure – which leaves out more unstable food and energy prices – eased slightly as well. And that’s a sure(ish) indication that those price rises are finally calming down a bit.

US inflation

Why should I care?

For markets: Told you so.

This news will come as a relief to the US Federal Reserve (the Fed), which has maintained for a while that high inflation will fizzle out and has, in turn, stuck to its guns on leaving interest rates where they are. And now that the Fed’s decision looks like it’s been vindicated, investors – worried about the damage higher rates could do to stocks – can breathe a little easier too.

The bigger picture: This could still backfire.

Developed countries around the world are feeling the pinch of inflation right now, but the US is getting squeezed most of all. It’s not hard to see why: the US government flooded the country with dollars when it rolled out rescue packages worth 25% of its economy. That’s helped it recover more quickly than most, sure, but it could also mean the US is battling inflation for a lot longer than its rivals are.

Keep reading for our next story...

Job Vacancies In The UK Have Reached New Highs

UK image

Data out on Tuesday showed UK job vacancies have hit record highs, so the country’s bosses had better action some blue-sky thinking before COP to manage these optics.

What does this mean?

It looks like British companies are quite done slacking off, as job openings top one million for the first time and the unemployment rate ticks down to 4.6%. In other words, there are fewer people looking for work and more than enough jobs for them to apply for – a sharp turnaround from this time last year.

Job vacancies

Of course, “more than enough” jobs could be a problem in itself, with companies now likely to find filling them more of a struggle. But that shouldn’t exactly come as a surprise: this year has seen the biggest drop in the number of Brits either in work or looking for it since the early 1990s. And while the pandemic hasn’t helped, Brexit – which has made it harder to bring in workers from outside the UK – should probably hold its hands up and say “My bad” for this one.

Stats

Why should I care?

The bigger picture: Britain takes back control.

The Brexit effect is making life difficult in other ways too: it’s adding fuel to the fire that is the world’s struggling supply chain, which might be why the UK government has just delayed introducing new checks on products imported from the European Union (EU) until 2022. No such luck for Britain’s exporters, though, which still have to fill out piles of paperwork to meet the EU’s own stringent checks.

For you personally: Now, about that raise…

All these scrambles for staff probably mean one thing: companies will offer higher and higher wages to attract someone qualified, enthusiastic, or – heck, even having a pulse will probably do at this stage. So if that’s you, it just might be worth turning on those LinkedIn notifications...

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