US Inflation Down
September 19, 2007
The US rate of inflation has fallen slightly over the course of August, according to official figures released today, waiving most critics fears that inflation could prove a problem for the Federal Reserve.
Over the month of August, inflation fell down by 0.1% as a result of plummeting energy costs throughout the US, reflecting an improving situation in the economic outlook for the short to medium term.
However the US consumer prices were seen to have risen by 0.2% with food and energy stripped from the equation, which is pretty much in line with analyst forecasts prior to the announcements, reflecting the significance of the fall in energy prices over the period.
The news comes twenty four hours after the Federal Reserve announced its decision to slash interest rates by two increments down to 4.75%, in a bid to bring stability back to the sub-prime lending market and world stock exchanges after recent weeks of turmoil.
Critics had warned that the Federal Reserve’s new interest rate policy would further boost inflation, which was already proving something of a problem for the health of the economy.
However, today’s figures reflect that whilst inflation may be problematic, it is not yet at the rate many had previously thought.
Many analysts are now of the opinion that whilst the interest rate cut may stimulate inflation in the medium term, it will be more beneficial in reducing unrest in the sub-prime sector and global markets over the coming months.
Meanwhile, separate figures released today suggested that the US housing market is even further in decline, with new home builds are their lowest rate in over a decade.
It is hoped that the cheaper rate of borrowing will help increase demand for housing in the sector that has been stagnant for several years.