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Global Economy

US inflation hits 40-year high

The inflation rate in the United States rose unexpectedly sharply in the past month. Goods and services in the United States were 7.5 percent more expensive in January than a year earlier, according to the Department of Labor in Washington. This is the highest rate of inflation since 1982. Analysts had expected a rate of 7.3 percent; in December it was still 7.0 percent.

Inflation has been fueled by soaring energy prices. And the material shortages triggered by the Corona crisis also supported the upward trend in prices. The core rate, which excludes volatile energy and food prices, also rose more than expected. The annual rate climbed to 6.0 percent from 5.5 percent in the previous month, from 5.9 percent expected.

Fed under pressure

The inflation rate was thus even more significantly above the US Federal Reserve's target of two percent. The Fed had previously signaled a first interest rate hike in the pandemic for March. The markets are now expecting a key interest rate range of 1.50 to 1.75 percent by the end of the year. This would require six rate hikes of 0.25 percentage points each. Market observers also no longer rule out an interim large increase of half a point.

"The original expectation that the price surge caused by the tensions caused by the Corona crisis would quickly evaporate has long since vanished," commented Commerzbank analysts. With more and more categories, the prices would rise. This increases the risk that inflation will solidify if values are too high.

On the foreign exchange market, the euro came under pressure against the US dollar and briefly slipped below the US$ 1.14 mark.

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