Inflation and federal rate hike

Inflation was down more than expected in May, according to new data.

The Federal Reserve will not be raising interest rates, in fact they could lower them potentially. Housing prices remain high, but gas and food did come down in prices during May.

We were joined by Danny Court, Partner and Senior Economist at Elliot D. Pollack & Company, to discuss current rates.

The increase is a beneficial part of the data and a CPI of one shows it’s on budget, according to Court.

“It’s a good data point, so month over month, it was zero so that’s always a good reading, and that’s one index the CPI. The Fed likes to look at the PCE, the Personal Consumption Expenditure Index, as well. That’s up about 2.6% year over year, and it also read 0% month over month, so a good starting point,” said Court. 

Prices are also stable compared to previous years, and additionally there will most likely be three rate cuts in 2024. 

“We had some flat months at the end of 2023, so October and November, and that was that ill-fated announcement by the Fed that they said, ‘Oh it’s coming down.’ I think we will have three rate cuts in 2024, and then we had another jump in January, so you can tell by their recent history they’re going to wait for a couple of more months of this kind of reading before they make a move,” said Court. 

One of the significant parts of inflation is the housing market, and gas prices could potentially lower inflation in the future.  

“The housing price is a little bit of an interesting formula in the inflation index, and it’s that they impute what you would pay in rent for a house. So really it’s a look at what the rental market is doing, and that is going up, prices still going up. Gas prices has been a bright spot in lowering inflation. We’ve seen year over year declines in gasoline prices, but healthcare costs have gone up, insurance costs have gone up,” said Court.