Elon Musk referred to the inflation in the US. What did he say?

A key index of US inflation showed price increases holding steady in May while consumer spending slowed sharply, according to government data released on Thursday.

The price index for personal consumption expenditures (PCE) stood at 6.3% for twelve months, the same rate as in the previous month, reported the Department of Commerce. The stabilizing trend could be a sign that the Federal Reserve’s aggressive interest rate plans are starting to take effect to quell rising inflation, which has been at its highest level in more than 40 years.

Household spending rose just 0.2%, less than half from April, as consumers pull back amid rising prices. The world’s largest economy has been suffering from a wave of rising inflation for months, which has been aggravated by rising energy prices as a result of the Russian invasion of Ukraine.

Excluding volatile food and energy prices, PCE rose 0.3% in the month, the same as in April, and slowed slightly to 4.7% year-on-year, according to the report.

In this regard, the CEO of Tesla, Elon Musk, said that inflation “could have a downward trend”, through his Twitter account. He said he noticed this because: “More Tesla commodity prices are trending down than up.”

The Fed is expected to proceed with a new rate increase, with an eye on cooling the economy to contain inflation and at the same time trying to avoid a recession, a delicate balancing act.

Currently, interest rates remain between 1.50% and 1.75% after two years of practically zero rates. The central bank should try to a voluntary slowdown in economic activity is not too strong, so as not to hit the currently very strong labor market.

The hypothesis of a rise of three quarters of percentage points is the one preferred by the markets. In June, an increase of this magnitude was the highest up to that point since 1994.

But one of the Fed governors, Christopher Waller, recently opened the door for a one percentage point hike. The real estate market registered a sharp decline in operations due to exorbitant home prices and rising interest rates.

On the contrary, thousands of job offers do not find candidates, and consumption is maintained despite inflated prices.

The growth of the GDP of the United States in the second quarter will be known on Thursday and a slight increase is expected, after a negative first quarter (-1.6% in annual projection, the preferred measurement in the country, which projects growth to 12 months in the conditions at the time of measurement). If a contraction were to occur, the United States would technically be in a recession, posting two negative quarters.

Inflation returned to historical levels in June, from 9.1% to 12 months, according to the CPI consumer price index. A rate hike makes credit more expensive and, therefore, acts on the consumption of individuals and on the investment of companies, and releases pressure on prices.

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Elon Musk referred to the inflation in the US. What did he say?