“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.
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.
-
HMRC confirms crypto ETN ISA rulesWith crypto ETNs now technically available for UK retail investors, HMRC has confirmed they can be held in an ISA – but there’s a complication
-
Pensioners targeted in fine wine scams – the tactics to watch forWine has emerged as the latest lure in investment fraud, with pensioners being specifically targeted by scammers
-
Global investors have overlooked the top innovators in emerging marketsOpinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Investors should cheer the coming nuclear summerThe US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit
-
Healthcare stocks look cheap, but tread carefullyShares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?
-
The Palace of Westminster is falling downThe Palace of Westminster is in need of repair, but the bill is prohibitive, says Simon Wilson
-
'Gen Z is facing an AI jobs bloodbath'Opinion It has always been tough to get your first job, but this year, it's proving tougher than ever. AI is to blame, says Matthew Lynn
-
Should the Online Safety Act survive?The Online Safety Act, a measure to safeguard children, is having unintended consequences
-
The secret behind Sweden’s successOpinion Sweden's stock market is in rude health, says Max King. Why can't Britain follow suit?
-
Prabowo Subianto: Indonesia’s Deng XiaopingPrabowo Subianto, like his Chinese hero, is taking power in his 70s with big ambitions for his country. Yet many view his return to politics with dread
