Finance

January inflation gives Fed more reason to hold on interest rate cuts

Published

2 months ago

February 13, 2025

Business Finance News

Egg prices soared by more than 15% in January. (iStock)

Annual inflation increased to 3% in January, rising above expectations and giving the Federal Reserve further reason to slow down interest rate cuts.

Inflation increased 0.5% monthly, slightly exceeding expectations and above the previous month’s increase of 0.4%, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS). Core CPI, which excludes food and energy, rose by 0.4% in January, coming in at the same level as December’s increase. This brought the year-over-year rate to 3.3%.

Shelter costs rose 0.4% and were the most significant contributor to the monthly increase in January, accounting for nearly 30% of the monthly increase in all items. Gas was up 1.8% over the month. Food prices continued to rise, increasing 0.4% last month. The food at home index rose 0.5%, driven primarily by the soaring costs of eggs, which increased 15.2% in January.

“The unexpected acceleration in inflation marks the third consecutive monthly uptick in the consumer price index and extends a reflationary trend since two consecutive flat months for the index in May and June 2024,” Jim Baird, Plante Moran Financial Advisors’ chief investment officer, said in a statement. “Against a backdrop of solid demand, inflation has accelerated. It’s a reality that may spook consumers who remember the Covid-19 era price spike all too well.

“It will also make President Trump’s proposed import tariffs a tougher sell than was the case during his first term, when both inflation and interest rates were exceptionally low,” Baird continued.

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The Fed pauses on further rate cuts

The increase in inflation, combined with a stable jobs market and economic growth, has given the Federal Reserve more room to work.

The Federal Reserve held interest rates at 4.5% to 4.75% in January, prompted by strong economic indicators that gave the central bank more room to wait. Federal Reserve Chair Jerome Powell said that the central bank intend to remain cautious about additional rate cuts so long as the job market remains solid and prices continue to climb.

“The murkiness of evolving trade policy creates a significant unknown for Fed policymakers who will have to grapple with the potential conflicting policy challenges of slower real growth and higher inflation,” Baird said. “While even bearish forecasts are a far cry from the stagflationary environment of the 1970s, the playbook would seemingly still apply.

“Arresting inflation is likely to remain the priority for the Fed, even at the expense of near-term growth,” Baird said. “The fear of inflation expectations becoming unanchored is just too much for policymakers to ignore.”

You can take out a personal loan before future rate hikes to help pay down high-interest debt. Visit Credible to find your personal loan rate without affecting your credit score.

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How higher for longer impacts your wallet

All signs point to the Fed holding interest rates higher for longer, which means consumers will continue to be impacted by stubbornly elevated interest rates impacting a range of credit products, including credit cards, mortgages, unsecured personal loans and auto loans, according to Charlie Wise, TransUnion’s senior vice president of research and consulting.

“Consumers should avoid building and carrying large credit card balances, particularly in light of very high interest rates on this type of debt, and whenever possible pay more than the monthly minimums due on their cards,” Wise said in a statement.

Additionally, Wise advised that consumers keep a close watch on their credit profiles and keep them in the best shape possible so that when rates finally drop to a more manageable level, they are ready to refinance their existing debts into more affordable loans.

Using a personal loan to pay off high-interest debt at a lower rate could help you reduce your expenses and put money back in your wallet. You can visit Credible to find your personalized interest rate today.

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Finance

More Americans buy groceries with buy now, pay later loans

Published

4 hours ago

April 26, 2025

Business Finance News

People shop for produce at a Walmart in Rosemead, California, on April 11, 2025.

Frederic J. Brown | Afp | Getty Images

A growing number of Americans are using buy now, pay later loans to buy groceries, and more people are paying those bills late, according to new Lending Tree data released Friday.

The figures are the latest indicator that some consumers are cracking under the pressure of an uncertain economy and are having trouble affording essentials such as groceries as they contend with persistent inflation, high interest rates and concerns around tariffs.

In a survey conducted April 2-3 of 2,000 U.S. consumers ages 18 to 79, around half reported having used buy now, pay later services. Of those consumers, 25% of respondents said they were using BNPL loans to buy groceries, up from 14% in 2024 and 21% in 2023, the firm said.

Meanwhile, 41% of respondents said they made a late payment on a BNPL loan in the past year, up from 34% in the year prior, the survey found.

Lending Tree’s chief consumer finance analyst, Matt Schulz, said that of those respondents who said they paid a BNPL bill late, most said it was by no more than a week or so.

“A lot of people are struggling and looking for ways to extend their budget,” Schulz said. “Inflation is still a problem. Interest rates are still really high. There’s a lot of uncertainty around tariffs and other economic issues, and it’s all going to add up to a lot of people looking for ways to extend their budget however they can.”

“For an awful lot of people, that’s going to mean leaning on buy now, pay later loans, for better or for worse,” he said.

He stopped short of calling the results a recession indicator but said conditions are expected to decline further before they get better.

“I do think it’s going to get worse, at least in the short term,” said Schulz. “I don’t know that there’s a whole lot of reason to expect these numbers to get better in the near term.”

The loans, which allow consumers to split up purchases into several smaller payments, are a popular alternative to credit cards because they often don’t charge interest. But consumers can see high fees if they pay late, and they can run into problems if they stack up multiple loans. In Lending Tree’s survey, 60% of BNPL users said they’ve had multiple loans at once, with nearly a fourth saying they have held three or more at once.

“It’s just really important for people to be cautious when they use these things, because even though they can be a really good interest-free tool to help you kind of make it from one paycheck to the next, there’s also a lot of risk in mismanaging it,” said Schulz. “So people should tread lightly.”

Lending Tree’s findings come after Billboard revealed that about 60% of general admission Coachella attendees funded their concert tickets with buy now, pay later loans, sparking a debate on the state of the economy and how consumers are using debt to keep up their lifestyles. A recent announcement from DoorDash that it would begin accepting BNPL financing from Klarna for food deliveries led to widespread mockery and jokes that Americans were struggling so much that they were now being forced to finance cheeseburgers and burritos.

Over the last few years, consumers have held up relatively well, even in the face of persistent inflation and high interest rates, because the job market was strong and wage growth had kept up with inflation — at least for some workers.

Earlier this year, however, large companies including Walmart and Delta Airlines began warning that the dynamic had begun to shift and they were seeing cracks in demand, which was leading to worse-than-expected sales forecasts.