HomeLatest NewsInflation Dips, but Rate Hikes Still Loom

Inflation Dips, but Rate Hikes Still Loom

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Inflation has once again decreased year-over-year, according to the Consumer Price Index (CPI), which was released in June. It was the lowest level since early 2021. It rose by 0.2 percent from month to month, which still indicates a slowdown of inflation.

This is still higher than the Federal Reserve target of 2 percent and could lead to more interest rate hikes, even though the Fed board’s meeting in June saw a temporary pause in rate increases.

The numbers were lower than Wall Street economists had predicted.

The Wall Street Journal surveyed economists who estimated that consumer prices increased by 3.1% from a year ago in June, which is still higher than the Fed’s target of 2%.

Fed officials have signaled that they are likely to raise interest rates to a 22-year high at their July 25-26 meeting, following recent signs of stronger-than-anticipated economic activity. The inflation report on Wednesday is not expected to alter this outcome.

The core CPI figures, which exclude volatile energy and food prices, showed an inflation rate of 4.8 percent over the past year and 0.2 from the previous months. Wall Street’s original estimates predicted increases of 5% and 0.3 %, respectively.

The core prices remain a concern to most consumers. While energy costs have fallen, the prices of other goods and services are still higher. The Fed has been trying to reduce inflation by raising interest rates, but the rate is still high.

Even though the Fed paused its rate hikes in June and re-started them, the majority of board members indicated that they expect at least two additional rate increases this year. The current rate of interest is between 5 to 5.25 percent. The Fed’s primary goal is to keep inflation below or at 2 percent. This means that efforts to reduce inflation will likely continue. The purpose of the June pause was to assess what impact rate increases and other efforts have had.

The Fed may be tempted to increase rates again if inflation continues to rise, but the majority of signs point towards another hike at their meeting in July.

The biggest concern among economists has been a looming recession, which many predicted could hit as early as the middle of this year. However, the economy has proven more resilient, though worries remain that the end of this year or the beginning of 2024 is still ripe for a recession if things don’t change.

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