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Economics Gazette

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November 20, 2019

The US inflation continues its acceleration

US inflationThe consumer spending in the United States increased by 0.2% in January on the background of higher earnings, driven by the tax cuts. At the same time, the consumer prices jumped by 0.3%, which is the biggest increase in 12 months.

The Ministry of Commerce reported that a slight rise in spending followed an increase of 0.4% in December and 0.8% in November. The income has risen by 0.4% thanks to bonuses linked to the 30-billion-dollar tax cut that the government expects to have paid in January.

Income after taxes jumped by 0.9%, which is the largest increase in last 12 months. The interest rates on savings deposits increased after falling to 12-year minimum in December. There are also some signs of inflationary pressures. The key consumer price index, excluding unstable food and energy prices, rose by 0.3%.

On this background, earlier this week, it became clear that in the past week, the number of Americans applying for unemployment benefits has fallen to its lowest point in 48 years.

The increased employment and rising inflation may cause the Federal Reserve to raise interest rates more drastically to prevent overheating. The Fed foresees three interest rates hikes in 2018.

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