That's a stark difference from last year, when inflation hit record-breaking levels in June with a 9.1% yearly increase. Inflation now sits at 5% year over year, according to the Bureau of Labor Statistics. Here's what you need to know about inflation, what's next for the economy and how to safeguard your money. However, this has also led to increased interest rates for savings, certificates of deposit and money market accounts.Īlthough this rate increase will make borrowing even more expensive, the most important takeaway from the May Fed meeting is the Fed signaling a pause in hikes going forward, said Tom Graff, head of investments at Facet. As the Fed raised rates, the cost of borrowing for loans, credit cards and mortgages also increased, making financing less affordable. In response, the Fed has aggressively raised interest rates to try to bring down prices. From groceries to gas, everyday essentials have gone up in cost. Since early 2022, the Federal Reserve has been working to temper rising prices and tame runaway inflation. "My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal," said Fed Chair Jerome Powell at the Federal Open Market Committee meeting press conference. However, with another bank failure in the news - the recent collapse of First Republic Bank - and inflation still not at the 2% target, the Fed's decision to raise rates incrementally is unsurprising. With inflation slowing and jobless claims still below historical averages, some experts expected the Fed to pause its rate hikes this month. "It has been more than a decade since we have seen rates this high." "The rate increase is a signal that the fight against inflation is far from over, despite signs that things are heading in the right direction," said Bruce McClary, senior vice president for communications at the National Foundation for Credit Counseling. It's clear that while inflation is improving, the Fed's job isn't done. Or, maybe the final increase already happened in July if incoming economic data is more favorable.The Federal Reserve issued its 10th consecutive rate hike since March 2022, pushing the federal funds rate to a target range between 5% and 5.25%, the highest level since 2007. However, if upcoming economic data doesn’t provide reassurance that the Fed that inflation is coming back to its 2% goal, then the Fed may start to hint at another 2023 interest rate increase, probably in November. We’re likely very close to the top of this interest rate cycle. So, some degree of moderation will be well received by policy makers as a way to help cool inflation - however, not so much that the U.S. The Fed believes the labor market was running fairly hot since 2021. Unemployment data will be important, too. But so far, the Fed may be willing to look through more volatile energy prices. Energy prices are generally increasing at the moment, which could drive up headline inflation numbers further. Within these numbers, the Fed is looking for services prices to cool and for housing prices to moderate. ![]() The key data to watch will be inflation reports. As such the Fed may be on the same page as markets, with another 2023 rate hike possible but not certain, depending on incoming economic data. It appears some policymakers may be less committed to another 2023 hike if recent comments are any guide. However, a lot of data has come in since June, and on September 20, those projections will be updated. The most recent Fed projections from June did signal a second interest rate increase was likely in late 2023. The most recent statements from Fed officials have generally discussed patience, risk management and data dependence in managing monetary policy with interest rates already at high levels. That’s more likely if the job market holds up well on incoming data. Signs that inflation isn’t cooling could produce a rate increase. Over the coming weeks, comments from Fed officials and incoming economic data will help inform likely outcomes for the November meeting where an interest rate hike could occur. ![]() The market currently puts the chance of a November hike at a little less than 40%. However, the Fed’s November meeting could result in an interest rate increase.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |