“Central banks are winning the battle against inflation,” says The Economist, “but the war is just getting started.” US inflation has fallen swiftly from 9.1% two years ago to 3% last month. But a return to the low-inflation world that preceded Covid is unlikely.
Donald Trump’s promise of 10% across-the-board tariffs if he re-takes the White House will send a new inflationary shock through the world economy, while green investment and climate change are keeping commodity prices high.
Recent US inflation data undershot forecasts, reassuring economists that the country is well on the way to the 2% target.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
US economy and unemployment
Some have begun to fret that unemployment could be a bigger menace than inflation, says Matt Egan on CNN. Unemployment has ticked up to 4.1% and has risen for three months in a row, a “yellow” light that tight monetary policy is starting to hurt the US economy. Unless it begins to cut rates soon, the US Federal Reserve risks “injecting inflation-fighting medicine into an economy that no longer needs it”.
US rate cuts
A first US rate cut is expected in September, but one wonders why the Fed should wait, adds Aaron Back in The Wall Street Journal. Recent weeks have brought a succession of “warnings from consumer-facing companies that American shoppers are tightening their belts."
Just a few months ago some Fed officials were hinting that the US economy was so robust that they might not cut rates at all this year, says Edward Harrison on Bloomberg.
But recent data suggests “the US is much closer to a recession than anyone thought”. Markets have thus almost gone back to where they were at the start of the year – predicting two to three quarter-point US rate cuts before the end of 2024. The prospect of easier money will support US stocks.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
M&S and Tesco among those warning of a £7bn Budget hitSeventy-nine UK retailers have written to Chancellor Rachel Reeves about possible price rises and job cuts - here is what it means
-
How much does it cost to move home under the Labour government?Home-moving costs are rising and could get more expensive once stamp duty thresholds drop in April 2025
-
What Trump's presidential election win means for the US economyWhat will Trump's US presidential election win actually mean for Americans and the rest of the world?
-
Media mogul James Dolan takes straight shot at the limelightControversial media mogul James Dolan has been hailed as a visionary for his Sphere arena in Las Vegas. But can he square the circle financially?
-
US election – is the Trump Trade back?The US election is around the corner. How does Trump influence US markets?
-
A bull market on borrowed timeWhile the US enjoys a bull market, it may not last. Will the US rate cut push stock prices down?
-
Pfizer shares rise as US investor takes $1 billion stakePfizer shares are on the up since US activist investor Starboard Value built up a stake in the drug maker. But strategic options appear limited
-
Jimmy Carter makes history as the first former US president to turn 100When Jimmy Carter left office, few would have predicted an outbreak of national affection for the former president’s 100th birthday four decades later. But his legacy is worth celebrating
-
Eric Adams: the New York City mayor charged with corruptionControversy and accusations of corruption have followed Eric Adams in his rise to the mayoralty of New York City. Now he has been charged with a federal crime.
-
The US election has witnessed more political violence, just how ugly could it get?US Election Donald Trump is at the center of the US election yet again, but not for good reason. Will there be a peaceful handover of power in 2025?
