Is the Federal Reserve finally about to cut interest rates?
Economic data released this week suggests inflation is continuing to cool, paving the way for the Federal Reserve to lower interest rates, which would relieve some of the pressure high borrowing costs put on consumers and businesses.
According to the July Consumer Price Index (CPI) report released Wednesday, year-over-year inflation dipped to 2.9 percent overall, lower than any month since March 2021. The CPI captures the change in prices of representative goods and services purchased by consumers compared to the same month in the previous year and is considered a standard measure of inflation. Though the report found costs associated with child care and renting a home continue to rise at a higher rate than prices overall, inflation has dropped significantly since its peak of 9.1 percent in June 2022, and it is now inching closer to the Fed’s 2 percent target rate. And if it were not for rental inflation, the overall inflation rate would be below that 2 percent target.
It follows another good day of data on Tuesday, when the latest Producer Price Index report, which measures the change in prices for goods and services sold by producers to retailers, indicated that wholesale inflation had also come down to 0.1 percent, on par with low pre-pandemic levels. High wholesale inflation can sometimes indicate that prices will rise for consumers because retailers have to recoup higher costs.
These numbers suggest a better economy for consumers, but the overall picture certainly isn’t perfect.
