In April, US inflation fell for the first time since January, reaching +3.4% year-on-year, compared with +3.5% the previous month. This decrease offers President Joe Biden a respite in the midst of an election period, even if he stresses that "there is still a lot to do".
After rising for a quarter, general inflation in the United States finally eased in April. The Consumer Price Index (CPI), published by the Department of Labour, confirmed the fall to +3.4% year-on-year, in line with analysts' forecasts. The fuel and housing sectors were the main contributors to this trend, but the good news came from so-called core inflation (excluding food and energy), which fell to its lowest level for two years.
Joe Biden welcomed this fall, which comes at the height of the presidential campaign in November. In the face of constant Republican criticism attributing the rise in prices to his administration, the easing of inflation offers Biden a powerful argument. The President has warned, however, that the road to total economic stability is still a long one, while criticising Republican proposals as inflationary.
This fall in inflation opens the door to a possible reduction in key rates by the Federal Reserve, which has maintained high rates for the past two years to combat inflation. Although June appeared to be an option, the Fed wants to see inflation closer to 2% before any easing. Fed Chairman Jerome Powell has expressed doubts about the speed of this return to target, calling for patience to allow time for current policies to take effect.
Inflation is also slowing in the eurozone, moving closer to the 2% target set by the European Central Bank, with rates particularly low in France and Germany. This trend makes it likely that the ECB will cut rates as early as June, in contrast to the more complicated situation in the United States.
The financial markets reacted positively to the inflation news, with a notable rise on Wall Street. On the other hand, the dollar lost value, especially against the yen and the euro, suffering from expectations of a potentially less restrictive monetary policy from the Fed.
At the same time, Bitcoin took advantage of this atmosphere of monetary easing to rebound, reaching $66,000, a high not seen since the end of April. The move suggests renewed confidence among investors, who are relieved to see inflation moderating and the Fed maintaining its accommodative stance.
