Inflationary Tensions: US Federal Reserve Faces New Challenges

The inflation rate in the USA could once again strain the nerves of the Federal Reserve. The latest figures on the price development of personal consumption expenditures (PCE), which are to be released by the Bureau of Economic Analysis on Friday, suggest according to economists' forecasts an increase of 2.5% in November. This would place the increase above the previous month's 2.3%. This development reflects a similar dynamic in the consumer price index, which was released at the beginning of the month. As the Federal Reserve pays particular attention to the PCE index, these figures could have far-reaching implications for the central bank's future interest rate policy. This could result in more expensive lending, affecting mortgages, car loans, and consumer credit. Core inflation, which excludes volatile food and energy prices, is also expected to have reached 2.9%, the highest level since April. These more stable measures are of greater interest to monetary policy as they better reflect long-term trends. Despite a general decline in inflation over the year, this progress has stalled in recent months. This could force the Federal Reserve to keep interest rates high for longer. The Fed had kept its benchmark rate at a twenty-year high for over a year to curb inflation, before cutting rates in September and November following positive inflation data. However, current developments could result in planned interest rate cuts being less frequent and sparing next year. Analysts at Deutsche Bank stated on Monday that a robust economy, lower risk premiums in the labor market, and more flexible inflation could prompt the Fed to delay rate cuts.