Inflation is declining more in the United States

The United States saw a larger decline in inflation in October than in previous months. According to the US government, inflation last month reached 7.7 percent on an annual basis, compared to 8.2 percent in September. This means that costs for consumers have fallen for four months in a row.

At the moment, it seems that the peak is behind us. In June, inflation peaked at 9.1 percent, the highest record level in the past 40 years. The current figure of 7.7 percent is slightly lower than the expectations of economists who expected the inflation rate to reach 7.9.

Excluding highly volatile energy and food prices, prices rose by an average of 6.3% year-on-year, compared to 6.6% in September. This number was also lower than the 6.5 percent that economists had expected.

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For the Federal Reserve, the US central bank, the inflation rate is very important to determine whether interest rates need to be adjusted. This year, the Fed has already raised interest rates five times, four of them by a record step of 0.75 percent. By raising interest rates, it becomes more expensive to borrow money and less money is available, which can reduce the rise in prices. However, it usually takes several months before an interest rate increase takes effect.

Maybe fewer big interest rate moves

Cooling inflation increases the likelihood of interest rate hikes being less severe in the future. The Fed is scheduled to meet again in December to discuss interest rate policy. At the previous meeting at the beginning of this month, Fed Chairman Jerome Powell had already indicated that interest rates might be increased in smaller steps. He noted that the Fed is likely to continue raising interest rates for a longer period to bring inflation down to the 2% target.

Investors are responding enthusiastically to low inflation numbers. Shortly after the start, the Dow Jones index rose 2.4 percent to 33,336 points. The broader Standard & Poor’s 500 index gained 3.5 percent to 3,880 points, and the Nasdaq technology index rose 4.9 percent to 10,855 points.