Will the Fed win the war on inflation? It’s complicated

EARLIER hopes that annual inflation in the United States may be falling were dashed when figures published in September showed that excluding the volatile food and energy categories, core inflation clocked in at 4.9 per cent in August, up from 4.7 per cent in July.

That explained why the US Federal Reserve decided to raise interest rates by 75 basis points for the third consecutive time – an unprecedented move since the central bank began explicitly targeting the federal funds rate in the late 1980s. The Fed continues to try to tame four-decade highs in inflation, now running at more than 8 per cent.

Indeed, contrary to the wishful thinking of some investors that the spell of inflation may be over and that the Fed would start easing on its monetary fight, the central bank’s leaders have made it clear in recent days that they intend to raise rates higher and higher, then maintain them until there is “clear and convincing” evidence, as chairman Jerome Powell put it, that inflation is cooling.