CPI Insights: Inflation is Cooling, Fed Cuts Ahead
Inflation Cooling and Fed Rate Cuts
Put aside the somewhat larger increase in core inflation in August. The path ahead for the Federal Reserve appears clear. After several years of stubbornly high inflation, the Fed has gained the upper hand. Inflation is cooling and likely to continue to cool, in fits and starts, toward the central bank’s 2% goal.
Labor Market Concerns
The bigger worry for the Fed is a backsliding labor market. Job openings have tumbled. Hiring has fallen off to the slowest pace since the pandemic. And the unemployment rate has risen to a nearly three-year high of 4.2%.
Fed's Interest Rate Cuts
That explains why the Fed is about to cut interest rates. The Fed jacked up borrowing costs in 2022 and 2023 to corral the worst inflation in 40 years, but at the cost of some economic growth and jobs. Final victory over inflation might take another year or two, but barring any surprises, it’s cleanup time.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.