Personal Finance

Here’s the inflation breakdown for October 2024 — in one chart

Published

7 months ago

November 13, 2024

Business Finance News

A customer walks by a display of fresh eggs at a grocery store on Sept. 25, 2024 in San Anselmo, California.

Justin Sullivan | Getty Images

Progress in the fight to tame pandemic-era inflation appears to have stalled out in October, despite lower prices at the gasoline pump and a moderation in other consumer staples such as groceries.

Meanwhile, economists think policies such as import tariffs floated by President-elect Donald Trump would likely — if enacted — exacerbate the inflation rate, which hasn’t yet declined to policymakers’ long-term target.

The consumer price index, a key inflation gauge, was up 2.6% in October versus a year ago — an increase from 2.4% in September, the Bureau of Labor Statistics reported Wednesday. The reading was in line with economists’ expectations.

While that October uptick may seem like a setback, consumers can take solace that broad price pressures are continuing to ease, economists and policymakers said.

Federal Reserve Chair Jerome Powell on Thursday said economic data points to inflation “continuing to come down on a bumpy path.”

“One or two really good data months or bad data months aren’t going to really change the pattern at this point,” Powell said during a press conference.

Annual inflation rate hit 2.6% in October, meeting expectations

Stephen Brown, deputy chief North American economist at Capital Economics, echoed that sentiment: “The overall [inflation] trend is positive,” he said.

In fact, the pickup in the annual inflation rate is at least partly due to a statistical quirk: The monthly inflation rate in October 2023 was unusually low, making the October 2024 reading look relatively high by comparison, economists said.

‘Lagged impacts’ create trouble spots

Inflation has pulled back significantly from its pandemic-era peak of 9.1% in June 2022.

However, there are still some trouble spots.

Auto insurance prices, for example, are up 14% since October 2023, according to CPI data.

Vehicle insurance premiums face “upward pressure” largely due to a lag effect from earlier inflationary dynamics, Brown said.

For example, new and used vehicle prices began to surge in 2021 amid a shortage of semiconductor chips used to manufacture cars; because of that sticker shock, insurers’ cost to replace vehicles after a car accident is much higher, Brown said. Insurers also typically need approval from regulators to raise consumer premiums, a process that takes time, he said.

“Lagged impacts” are affecting other categories, too, making for overall slow progress on reining in inflation, Brown said.

Housing is the ‘major impediment’

Homes in Discovery Bay, California.

David Paul Morri | Bloomberg | Getty Images

Housing, the largest CPI category, is a key example of that lag.

Shelter inflation has throttled back painfully slowly, even as inflation in the national rental market has declined considerably, economists said.

“Market rents, newly signed leases, are experiencing very low inflation,” Powell said during the press conference.

Shelter inflation has taken a long time to adjust to that housing backdrop due to how federal statisticians compile the CPI index. In short, its slow adjustment up or down is by design.

“So that’s just a catch-up problem,” Powell said. “It’s not really reflecting current inflationary pressures.”

CPI shelter inflation heated up on a monthly basis in October, rising to 0.4% from 0.2% in September. Its annual inflation rate has declined to less than 5% from a peak of more than 8% in early 2023.

Shelter is “the continued major impediment to getting inflation all the way back,” said Mark Zandi, chief economist at Moody’s.

The Federal Reserve has a long-term annual inflation target of around 2%.

Where consumers saw some relief in October

Brandon Bell | Getty Images News | Getty Images

Consumers saw some relief at the grocery store and at the gas pump in October.

Inflation for groceries cooled on a monthly basis, to 0.1% from September to October, down from 0.4% the prior month. Grocery prices are up about 1% since October 2023.

They’re “very, very tame,” Zandi said.

That’s despite various supply-and-demand idiosyncrasies that are raising prices for certain food items, he said. For example, avian flu, which is lethal for chickens and other birds, has negatively affected egg supply and led prices to swell 30% in the past year; similarly, a poor orange crop has pushed up orange prices 7% annually.

The price for a gallon of gasoline fell 1% during the month, according to CPI data. Prices are down more than 12% in the past year.

“Gasoline prices are way down,” Zandi said. Average prices could fall further, to below $3 a gallon, he said. They were at $3.05 a gallon, on average, as of Nov. 11, according to the U.S. Energy Information Administration.

“We could get more relief there because global oil prices are soft,” Zandi said.

That weakness may be in anticipation of President-elect Donald Trump’s proposed policies around China, said Zandi. Those may include tariffs of at least 60% on goods imported from China, which has a huge appetite for oil. If Trump’s policies were to negatively affect the Chinese economy, they’d also likely dampen China’s oil demand.

Trump policies thought to be inflationary

Trump has proposed broader tariffs, of perhaps 10% or 20% on all goods imported to the U.S. Additionally, he has announced plans to deport millions of undocumented immigrants and enact a package of tax cuts.

If put in place, such policies would likely stoke U.S. inflation, economists said.

“While we believe that inflation remains on a disinflationary trajectory, we now see the risks as clearly tilted to the upside,” Bank of America economists wrote in a note Monday. “These risks stem from potential policy changes rather than economic fundamentals.”

Placing an import tax on goods would likely lead U.S. companies to raise prices for those goods, for example, economists said. Fewer immigrants in the labor pool may push businesses to raise wages to attract applicants and retain workers, while tax cuts could put more money in consumers’ pockets and boost their spending.

“Indeed, we see pro-growth fiscal policy, tariffs, and tighter immigration as potential sources of upside inflation risk over the coming years if they are implemented,” Bank of America economists wrote.

The annual inflation would likely be around 2.1% by the end of 2025 absent Trump’s policies, said Brown of Capital Economics. If enacted, that figure would likely be around 3%, he said, as a “ballpark estimate.”

“The return of inflation to the 2% target may prove short-lived,” Brown wrote in a research note Wednesday.

However, much depends on how, when and if those policies are enacted, economists said.

Personal Finance

What Pell Grant changes in Trump budget, House tax bill mean for students

Published

9 hours ago

June 8, 2025

Business Finance News

Carol Yepes | Moment | Getty Images

For many students and their families, federal student aid is key for college access.

And yet, the Trump administration’s budget proposal for fiscal year 2026 calls for significant cuts to higher education funding, including reducing the maximum federal Pell Grant award to $5,710 a year from $7,395, as well as scaling back the federal work-study program. The proposed cuts would help pay for the landmark tax and spending bill Republicans in the U.S. Congress hope to enact.

Roughly 40% of undergraduate students rely on Pell Grants, a type of federal aid available to low-income families who demonstrate financial need on the Free Application for Federal Student Aid. Work study funds, which are earned through part-time jobs, often help cover additional education expenses.

President Donald Trump‘s “skinny” budget request said changes to the Pell Grant program were necessary due to a looming shortfall, but top-ranking Democrats and college advocates say cuts could have been made elsewhere and students will pay the price.

“The money we invest in post-high school education isn’t charity — it helps Americans get good jobs, start businesses, and contribute to our economy,” Sen. Elizabeth Warren, D-Mass., told CNBC. “No kid’s education should be defunded to pay for giant tax giveaways for billionaires.”

Pell Grants are ‘the foundation for financial support’

Nearly 75% of all undergraduates receive some type of financial aid, according to the National Center for Education Statistics.

“Historically the Pell Grant was viewed as the foundation for financial support for low-income students,” said Lesley Turner, an associate professor at the University of Chicago Harris School of Public Policy and a research fellow of the National Bureau of Economic Research. “It’s the first dollar, regardless of other types of aid you have access to.”

Under Trump’s proposal, the maximum Pell Grant for the 2026-2027 academic year would be at its lowest level in more than a decade.

“The Pell reduction would impact the lowest-income families,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

More than 92% of Pell Grant recipients in 2019-2020 came from families with household incomes below $60,000, according to higher education expert Mark Kantrowitz.

How Pell Grant cuts could affect college students

If the president’s cuts were enacted and then persisted for four years, the average student debt at graduation will be about $6,500 higher among those with a bachelor’s degree who received Pell Grants, according to Kantrowitz’s own calculations.

“If adopted, [the proposed cuts] would require millions of enrolled students to drop out or take on more debt to complete their degrees — likely denying countless prospective low- and moderate-income students the opportunity to go to college altogether,” Sameer Gadkaree, president and CEO of The Institute for College Access & Success, said in a statement.

Already, those grants have not kept up with the rising cost of a four-year degree. Tuition and fees plus room and board for a four-year private college averaged $58,600 in the 2024-25 school year, up from $56,390 a year earlier. At four-year, in-state public colleges, the average was $24,920, up from $24,080, according to the College Board.

The Pell program functions like other entitlement programs, such as Social Security or Medicare, where every eligible student is entitled to receive a Pell award.

However, unlike those other programs, the Pell program does not rely solely on mandatory funding that is set in the federal budget. Rather, it is also dependent on some discretionary funding, which is appropriated by Congress.

The Congressional Budget Office projected a shortfall this year in part because more students now qualify for a Pell Grant due to changes to the financial aid application, and, as a result, more students are enrolling in college.

Cutting the Pell Grant is ‘extreme’

Although there have been other times when the Pell program operated with a deficit, slashing the award amount is an “extreme” measure, according to Kantrowitz.

“Every past shortfall has been followed by Congress providing additional funding,” he said. “Even the current House budget reconciliation bill proposes additional funding to eliminate the shortfall.”

However, the bill also reduces eligibility for the grants by raising the number of credits students need to take per semester to qualify for the aid. There’s a concern those more stringent requirements will harm students who need to work while they’re in school and those who are parents balancing classes and child care.

“These are students that could use it the most,” said the University of Chicago’s Turner.

“Single parents, for example, that have to work to cover the bills won’t be able to take on additional credits,” Mayotte said.

“If their Pell is also reduced, they may have to withdraw from school rather than complete their degree,” Mayotte said.

Personal Finance

What a ‘revenge tax’ in Trump’s spending bill means for investors

Published

10 hours ago

June 8, 2025

Business Finance News

WASHINGTON DC, UNITED STATES – MAY 30: United States President Donald Trump departs at the White House to U.S. Steel’s Irvin Works in West Mifflin, Pennsylvania in Washington D.C May 30, 2025.

Celal Gunes | Anadolu | Getty Images

As the Senate weighs President Donald Trump‘s multi-trillion-dollar spending package, a lesser-known provision tucked into the House-approved bill has pushback from Wall Street.

The House measure, known as Section 899, would allow the U.S. to add a new tax of up to 20% on foreigners with U.S. investments, including multinational companies operating in the U.S.

Some analysts call the provision a “revenge tax” due to its wording. It would apply to foreign entities if their home country imposes “unfair foreign taxes” against U.S. companies, according to the bill.

“Wall Street investors are shocked by [Section] 899 and apparently did not see it coming,” James Lucier, Capital Alpha Partners managing director, wrote in a June 5 analysis.

If enacted as written, the provision could have “significant implications for the asset management industry,” including cross-border income earned by hedge funds, private equity funds and other entities, Ernst & Young wrote on June 2.

Passive investment income could be subject to a higher U.S. withholding tax, as high as 50% in some cases, the company noted. Some analysts worry that could impact future investment.

The Investment Company Institute, which represents the asset management industry serving individual investors, warned in a May 30 statement that the provision is “written in a manner that could limit foreign investment to the U.S.”

But with details pending as the Senate assesses the bill, many experts are still weighing the potential impact — including who could be affected.

Here’s what investors need to know about Section 899.

How the ‘revenge tax’ could work

As drafted, Section 899 would allow the U.S. to hike existing levies for countries with “unfair foreign taxes” by 5% per year, capped at 20%.

Several kinds of tax fall under “unfair foreign taxes,” according to the provision. Those include the undertaxed profits rule, which is associated with part of the global minimum tax negotiated by the Biden administration. The term would also apply to digital services taxes and diverted profits taxes, along with new levies that could arise, according to the bill.

The second part of the measure would expand the so-called base erosion and anti-abuse tax, or BEAT, which aims to prevent corporations from shifting profits abroad to avoid taxes.

“Basically, all businesses that are operating in the U.S. from a foreign headquarters will face that,” said Daniel Bunn, president and CEO of the Tax Foundation. “It’s pretty expansive.”

The retaliatory measures would apply to most wealthy countries from which the U.S. receives direct foreign investment, which could threaten or harm the U.S. economy, according to Bunn’s analysis.

Notably, the proposed taxes don’t apply to U.S. Treasuries or portfolio interest, according to the bill.

‘Strong priority’ for House Republicans

Section 899 still needs Senate approval, and it’s unclear how the provision could change amid alarm from Wall Street.

But the measure has “strong support” from others in the business community, and it’s a “strong priority” for Republican House Ways and Means Committee members, Capital Alpha Partners’ Lucier wrote.

House Ways and Means Committee Chairman Jason Smith, R-Mo., first floated the idea in a May 2023 bill, and has been outspoken, along with other Republicans, against the global minimum tax.

Elon Musk ramps up criticism of Trump bill

If enacted as drafted, Section 899 could raise an estimated $116 billion over 10 years, according to the Joint Committee on Taxation.

That could help fund other priorities in Trump’s mega-bill, and if removed, lawmakers may need to find the revenue elsewhere, Bunn said.

However, House Ways and Means Republicans may ultimately want foreign countries to adjust their tax policies before the new tax is imposed.

“If these countries withdraw these taxes and decide to behave, we will have achieved our goal,” Smith said in a June 4 statement.

Personal Finance

Forgotten 401(k) fees cost workers thousands in retirement savings

Published

1 day ago

June 7, 2025

Business Finance News

With more Americans job hopping in the wake of the Great Resignation, the risk of “forgetting” a 401(k) plan with a previous employer has jumped, recent studies show.

As of 2023, there were 29.2 million left-behind 401(k) accounts holding roughly $1.65 trillion in assets, up 20% from two years earlier, according to the latest data by Capitalize, a fintech firm.

Nearly half of employees leave money in their old plans during work transitions, according to a 2024 report from Vanguard.

However, that can come at a cost.

For starters, 41% of workers are unaware that they are paying 401(k) fees at all, a 2021 survey by the U.S. Government Accountability Office found.

In most cases, 401(k) fees, which can include administrative service costs and fees for investment management, are relatively low, depending on the plan provider.

But there could be additional fees on 401(k) accounts left behind from previous jobs that come with an extra bite.

Fees on forgotten 401(k)s

Jelena Danilovic | Getty Images

Former employees who don’t take their 401(k) with them could be charged an additional fee to maintain those accounts, according to Romi Savova, CEO of PensionBee, an online retirement provider. “If you leave it with the employer, the employer could force the record keeping costs on to you,” she said.

According to PensionBee’s analysis, a $4.55 monthly nonemployee maintenance fee on top of other costs can add up to nearly $18,000 in lost retirement funds over time. Not only does the monthly fee eat into the principal, but workers also lose the compound growth that would have accumulated on the balance, the study found.

Fees on those forgotten 401(k)s can be particularly devastating for long-term savers, said Gil Baumgarten, founder and CEO of Segment Wealth Management in Houston.

That doesn’t necessarily mean it pays to move your balance, he said.

“There are two sides to every story,” he said. “Lost 401(k)s can be problematic, but rolling into a IRA could come with other costs.”

What to do with your old 401(k)

When workers switch jobs, they may be able to move the funds to a new employer-sponsored plan or roll their old 401(k) funds into an individual retirement account, which many people do.

But IRAs typically have higher investment fees than 401(k)s and those rollovers can also cost workers thousands of dollars over decades, according to another study, by The Pew Charitable Trusts, a nonprofit research organization.

Collectively, workers who roll money into IRAs could pay $45.5 billion in extra fees over a hypothetical retirement period of 25 years, Pew estimated.

Another option is to cash out an old 401(k), which is generally considered the least desirable option because of the hefty tax penalty. Even so, Vanguard found 33% of workers do that.

How to find a forgotten 401(k)

While leaving your retirement savings in your former employer’s plan is often the simplest option, the risk of losing track of an old plan has been growing.

Now, 25% of all 401(k) plan assets are left behind or forgotten, according to the most recent data from Capitalize, up from 20% two years prior.

However, thanks to “Secure 2.0,” a slew of measures affecting retirement savers, the Department of Labor created the retirement savings lost and found database to help workers find old retirement plans.

“Ultimately, it can’t really be lost,” Baumgarten said. “Every one of these companies has a responsibility to provide statements.” Often simply updating your contact information can help reconnect you with these records, he advised.

You can also use your Social Security number to track down funds through the National Registry of Unclaimed Retirement Benefits, a private-sector database.

In 2022, a group of large 401(k) plan administrators launched the Portability Services Network.

That consortium works with defined contributor plan rollover specialist Retirement Clearinghouse on auto portability, or the automatic transfer of small-balance 401(k)s. Depending on the plan, employees with up to $7,000 could have their savings automatically transferred into a workplace retirement account with their new employer when they change jobs.

The goal is to consolidate and maintain those retirement savings accounts, rather than cashing them out or risk losing track of them, during employment transitions, according to Mike Shamrell, vice president of thought leadership at Fidelity Investments, the nation’s largest provider of 401(k) plans and a member of the Portability Services Network.

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