June Consumer Price Index is a Good Sign, But If Inflation Stops Trending Down More Interest Rate Hikes Are On The Way
In the chaotic landscape of the global economy, the recent Consumer Price Index (CPI) reports have offered a small glimmer of hope. Data suggests that the stringent measures taken to combat the inflationary highs of 2022, which peaked at 9.1%, are beginning to bear fruit.
Inflation in the United States eased to a multiyear low of 4% in May, marking the lowest rate since March 2021. Also, the Federal Reserve decided to pause rate hikes in June. This, coupled with their open-ended stance on future increases, signals a cautious optimism.
Still, the journey towards economic stability is far from over. Though the Consumer Price Index is down in June, it’s risen by 19% compared to May 2020. Not only that, inflation rates are still much higher than the Federal Reserve’s target of 2%.
Knowing all this, what’s the best way to think about the future of the economy? Lawrence Sprung, CFP, Founder and Wealth Advisor at Mitlin Financial, offers his insights to shed more light on the situation.
“Well, the CPI reports have come in this week and they’re coming in relatively good. The way we wanted to see it. It’s indicating and showing that we are well off the highs that we saw in mid to late 2022. So what’s been going on has been working. Now the important thing is what’s going to happen going forward. Well yesterday the Fed made it very clear with their pause in June and also their commentary stating that they’re leaving future rate hikes on the table. So the expectation is that if we don’t see the economic data furthering that inflation is on the way down, I would expect that we would see a rate hike in July and then another wait and see approach for future hikes. So hopefully you find this helpful and make it a great day.”
Article written by Adrienne St. Clair.
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