The summer will apparently bring no thaw to borrowing rates. Although, perhaps, the U.S. economy is now reaching the autumn of the elevated rates?
Seasonal references aside, there were some positive indicators this month that inflation is cooling (slowly) toward the Federal Reserve Board’s 2% goal.
The core inflationary data points for the previous month dropped more than many analysists had expected.
“Core Inflation at Lowest Level in Three Years,” the headline read from Forbes.
The article stated, “Inflation fell to its lightest level since April 2021 last month, according to the government’s core inflation metric released Wednesday morning, a welcome development for investors and prospective borrowers yearning for lower interest rates.”
Overall inflation declined (measure of yearly increase in April vs. yearly increase in May).
3.4%-3.3%
Core inflation dropped (subtracts food and energy prices – which can be more volatile – from the rest of the factors in the yearly measurements).
3.6%-3.4%
That is progress. Unemployment has stayed low, too. Low unemployment has been welcomed by workers as they have seen wages outpace inflation. Employers may see that differently, since they are the ones paying the higher wage.
RELATED: This CNBC report breaks down which costs are going up and which ones are going down. It also details how housing costs have stayed higher compared to many other sectors. See that here.
If you are looking for a V.I.P. quote that signals what is coming, then you might want to read the following from Federal Reserve Board Chair Jerome Powell:
“What we’ve been getting is good progress on inflation, with growth at a good level and with a strong labor market. Ultimately, we think rates will have to come down to continue to support that. But so far, they haven’t had to.”
One or two rate cuts by the Fed appear still possible for 2024. Glean from what you will after reading Powell’s comments about whether he thinks just one is more likely.
On Wednesday, the Fed opted to keep rates where they are.
“The policymakers, as expected, kept their key rate unchanged Wednesday at roughly 5.3%. The benchmark rate has remained at that level since July of last year, after the Fed raised it 11 times to try to slow borrowing and spending and cool inflation,” an Associated Press report included.
