In focus – US immaculate disinflation: How much should we thank the Fed for?

In focus – US immaculate disinflation: How much should we thank the Fed for?

The Federal Reserve is responsible for half of the decrease in US inflation over the past year. The decline, which brought inflation down to 3% in June, has been well-received by the markets. It supports the idea that the US economy is on track to achieve a soft landing, avoiding a recession and bringing inflation back to normal levels. The Fed’s contribution to lowering inflation can be attributed to two main factors: firstly, by reducing aggregate demand growth by 2 percentage points, and secondly, by effectively anchoring inflation expectations, resulting in a reduction of 3 percentage points. Overall, the Federal Reserve has successfully brought inflation down by 5 percentage points during the last 12 months.

Learn more here: https://www.allianz.com/en/economic_research/publications/specials_fmo/us-inflation.html