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American Inflation Resists

Prices jumped in the US, and that caused inflation to remain virtually stable last month. Energy prices rebounded, but other goods also experienced price rises.

By EC Invest

In the United States, prices jumped by 0.5% between December and January. As a result, inflation remained virtually stable in January at 6.4% compared to 6.5% in December. This is mainly due to a rebound in energy prices. But other goods and services also experienced a sharp price rise at the beginning of the year.

It takes time for inflationary pressures to diffuse into the economy fully. Not all tariffs adjust overnight. And the sharp rise in production costs last year will continue to push some prices upward in the coming months.

Moreover, after trimming their margins to limit price increases and preserve their market share, companies are now doing the opposite. They only partially pass on the moderation of certain production costs to restore their profitability. They can do this because household consumption has been very dynamic at the beginning of the year. In January, retail sales jumped 3% compared to the previous month and posted an annual growth of 6.4%.

The January inflation figure was an unpleasant surprise to markets hoping for a continued sharp decline in inflationary pressures as in previous months. However, the quasi-status quo at the beginning of the year has reminded us that containing price slippage is a long-term struggle.

To win this battle, the US Federal Reserve will have to raise its key rates several times and keep them high for some time, even if this weakens economic activity.

Although inflation is a challenge, the US remains an economic benchmark. Therefore, we keep 10% of our portfolio neutral (balanced) in American shares and 5% in bonds in dollars.

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