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The current state of consumer prices


In November, the consumer price index saw a slight increase, with prices growing faster than in the previous month. Over the past year, consumer prices rose by 2.7%, in line with expectations but higher than October’s rate of 2.6%. The core measure of inflation, which excludes volatile items, remained steady at 3.3% on a 12-month basis. The Federal Reserve, which had been hoping to continue lowering interest rates alongside slower price growth, may now pause its rate cutting in January due to the persistent inflation concerns.

The spending power of upper-middle-class and wealthy consumers, who are less affected by price growth, has been propping up the economy. However, their increased assets could potentially accelerate inflation. President-Elect Trump’s proposed policies, including tariffs and mass deportations, are expected to fuel inflation and potentially hinder economic growth. Uncertainty surrounding the future economic outlook could lead to a serious sell-off and pose challenges for the broader economy.

Wall Street traders predict that the Fed will cut its key interest rate by a quarter point in its upcoming meeting, but the response of interest rates in the rest of the economy remains unclear. Credit card interest rates have increased, while the average 30-year mortgage rate hovers just below 7%. Wealthier Americans have benefited from the rise in asset prices, but if these assets are overvalued, a sudden market shift could have significant negative implications for the economy.

The Fed is hesitant to assume that tariff-led consumer price inflation will be temporary, and it may adjust its rate cuts accordingly to stabilize both inflation and the unemployment rate. The overall economic landscape remains uncertain, with potential risks of price inflation or slower growth posing challenges for the Federal Reserve.

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www.nbcnews.com

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