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Americans seeking relief from high loan interest rates may not have to wait much longer.
US consumer prices fell in June for the first time since the early months of the pandemic. Latest data on Thursday showed that consumer prices fell 0.1 percent compared to May. On an annual basis, inflation fell to 3 percent last month from 3.3 percent in May.
The welcome slowdown in inflation has prompted investors to raise their forecasts for the timing of a possible rate cut by the US Federal Reserve. According to the CME FedWatch tool, Wall Street expectations for a September rate cut rose to around 93% on Thursday from 73% the day before.
“A rate cut in September should be a done deal at this point,” wrote Ron Temple, chief market strategist at Lazard, in a note on Thursday.
Economists at BNP Paribas updated their baseline scenario on Thursday to include a rate cut in September, based on June inflation and employment data. They expect two rate cuts of a quarter of a percentage point each in 2024.
The Fed has a dual mandate: to keep prices stable and unemployment low. The central bank began raising interest rates in 2022 to curb inflation and has kept them at the current 23-year high since last July.
Thursday’s data, coupled with a cooling but robust labor market, is an encouraging sign that the Fed can fulfill its dual mandate and begin cutting sky-high interest rates in September. The U.S. economy added 206,000 jobs in June, down from the downwardly revised 215,000 figure in May, and the unemployment rate topped 4% for the first time since November 2021. New jobless claims have also risen slightly in recent weeks.
Fed Chairman Jerome Powell gave no indication in his testimony before Congress earlier this week as to when the central bank might begin cutting interest rates, but he acknowledged that inflation has eased and the labor market is “strong but not overheated” – a change from just a few months ago, when inflation showed signs of reaccelerating and the labor market remained hot.
However, the Fed still has to evaluate more data before its September meeting that could change its course. Some economists fear that if the Fed does not cut interest rates by then, the cracks in the labor market could deepen. Some investors fear that the economy could weaken dangerously before then.
A rate cut in September “may not be the magic bullet some investors are looking for,” Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management, wrote in a note on Monday.
In June, prices fell for the first time since the pandemic began
Americans, who have been suffering from rapidly rising prices for three years, have just received encouraging news on the inflation front, reports my colleague Alicia Wallace.
The consumer price index, a measure of the average change in the price of a commonly purchased basket of goods and services, has fallen 0.1 percent since May, helping to reduce the annual inflation rate to 3 percent from 3.3 percent in May, according to the latest report from the Bureau of Labor Statistics.
Falling gasoline prices and a decline in new and used car prices contributed to the first monthly decline since May 2020, BLS data showed. On an annual basis, consumer prices are rising at the slowest pace since June 2023, reaching the lowest annual rate since early 2021.
Excluding energy and food prices, a closely watched “core” index of underlying inflation also slowed more than expected. Core CPI rose 0.1% from May – the slowest pace since August 2021 – and pushed the annual core inflation rate down to 3.3% from 3.4%, marking a new three-year low.
Read more here.
Why fast food menus aren’t as good a deal as you might think
“Value” is the new buzzword at fast-food chains across the country, reports my colleague Elisabeth Buchwald.
When rising prices deterred customers, restaurants recently responded by introducing cheaper menus.
McDonald’s, for example, offers a $5 meal that includes a McDouble cheeseburger or McChicken sandwich, along with small French fries, 4 chicken nuggets, and a small soft drink.
At Taco Bell, you can now get two different types of tacos, a five-layer burrito, chips with nacho cheese sauces, and a medium drink for $7. That’s 55% cheaper than ordering the items separately.
Like McDonald’s, Burger King offers a $5 meal package where customers can choose one of three types of burgers along with chicken nuggets and a drink.
But what is the real value of these “value” meals?
Well, actually not as much as you might think, since the prices of many key ingredients in value meals go down. In other words, you pay the going rate (or more).
Read more here.
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