Finance
July inflation drops below 3% as Fed considers September rate cut
Shelter costs are still high, but insurance rates are finally moderating. (iStock)
The annual inflation rate fell below 3% in July for the first time in over three years, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS).
On an annual basis, prices rose 2.9% in July, a slight softening from the 3.1% growth the previous month. On a monthly basis, prices increased 0.2% after dipping 0.1% in June. The last time the overall CPI inflation rate was less than 2.9% was in March 2021. Core inflation, which excludes more volatile food and energy prices, increased 0.2% monthly in July.
Inflation is moving closer to the Federal Reserve’s 2% target, but prices remain high on many essentials. The stickiest piece of the puzzle remains shelter costs, which rose by 0.4% in July and accounted for 90% of the monthly inflation increase. It also rose more than 5% over the past year.
“That’s significant as it represents an outsized part of the index, but shelter costs are also notoriously hard to measure accurately and are often perceived to move with a lag,” according to Jim Baird, Planet Moran Financial Advisors chief investment officer. “Other indicators suggest shelter costs are well positioned to fall further in the months ahead.”
Still, July’s inflation reading will likely give the Federal Reserve the evidence to green-light a rate cut in September and may trigger additional cuts before the year ends.
“Finally, the rate of price increases at the cash register continues to slow down after a couple of years of painful surges, signaling a victory for the Fed’s monetary policy,” CoreLogic Chief Economist Selma Hepp said. “This means for the average American that the Fed will likely cut interest rates next month, which will slightly bring down the cost of borrowing; a good step for auto and home sales, in particular.”
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Car insurance rates are finally slowing down
Consumers may start to see some easing in car insurance costs, one of the greatest drivers of overall inflation for months, according to Jerry’s Vice President of Insurance Operations Josh Damico. Although July’s 18.6% increase is still hard on consumers’ wallets, Damico said it is encouraging that cost spikes are finally slowing.
Insurance costs have skyrocketed in the last few years as inflation has driven up the costs of auto repairs and drivers submit more extensive claims. However, car repair costs and vehicle prices are stabilizing, which offers signs of hope, Damico said.
“Several carriers I’ve spoken with have started lowering rates, and many more in our network are telling us they’re re-evaluating increases they have taken or had planned to take in the future,” Damico said. “It seems we’ve turned a critical corner and American drivers can expect some relief.”
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Mortgage rates head in the right direction
Mortgage rates have moved in sync with the positive economic indicators and it becomes more apparent that the Fed will begin to ease its monetary policy this year.
The decline in mortgage rates, combined with a growing supply of housing inventory, should help increase prospective homebuyers’ appetites and give existing homeowners the opportunity to refinance.
“In the medium-run, we expect the economy to land softly and housing inventory to continue to recover,” Realtor.com Senior Economist Ralph McLaughlin said. “This should put downward pressure on mortgage rates this fall and winter and will set the stage for a much better season for homebuyers in 2025.”
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Barrons Roundtable discusses reports that Gen Z members are aggressive about wanting to retire.
Gen Z is the youngest generation of adults today, but with many struggling to make ends meet, a growing proportion say they do not expect to retire and few are socking away money to do so.
A new report from the TIAA Institute and UTA’s NextGen Practice found that a greater share of these adults age 27 and below do not anticipate retiring – at least in the traditional sense – after prior data showed nearly half of young adults either don’t want to retire, don’t believe they will be able to afford to, or are not thinking about it at all.
Gen Z as a whole has a very different view of retirement than previous generations, and a growing proportion of young adults say they do not plan on retiring at all. (iStock / iStock)
What’s more, just 20% of Gen Z respondents of working age say they are saving for retirement at all. While planning for retirement is important for everyone, saving for the future is critical for this generation that is projected to live past 100 years old. Yet, a higher cost of living could be impacting their ability to do so.
The study found that almost one-third of Gen Z (29%) are living paycheck-to-paycheck, with most of their money going to funding their basic needs, making it increasingly difficult for them to achieve financial milestones like homeownership while saving for their financial futures.
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“Thirty-six percent of respondents cited high debt or low income as the primary reason they are not saving for retirement,” Surya Kolluri, head of the TIAA Institute told FOX Business. “Gen Z is spending more on essentials than previous generations.”
Inflation is weighing on Gen Z’s finances more than prior generations, data shows. (iStock / iStock)
Kolluri said it is true that Gen Z is bearing the brunt of inflation more than the generations that preceded them, noting that as of this year, the annual inflation rate for Gen Z was half a percent higher than it was for other generations at the same age.
But Kolluri pointed to some positive findings in the data, too. He said that while only 1 in 5 reported saving for retirement, 66% of those who are saving for retirement are doing so through 401(k)s.
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There is also at least an awareness amid Gen Z’ers that it is important to save for the future. Eighty-four percent report saving a portion of their income each month (albeit not for retirement), and 57% say they have a budget that they stick to.
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Kolluri noted 52% of Gen Z reported putting savings into savings accounts because they value the liquidity that supports current financial freedom.
“They do not equate saving for retirement as helping to ensure their financial freedom later in life…and ‘freedom’ is a concept that is very important to Gen Z,” he said. “They want flexibility and access to savings if and as they want.”
LONDON — Cybersecurity firm Wiz is seeking to hit $1 billion of annual recurring revenues next year, the company’s billionaire co-founder Roy Reznik told CNBC, adding that the firm will go public “when the stars align.”
Wiz makes software that connects to cloud storage providers like Amazon Web Services or Microsoft Azure and scans for everything it stores in the cloud, helping organizations identify and remove risks in their cloud environments. It was founded by four Israeli friends while they served in 8200, the intelligence unit of Israel’s army, and most of Wiz’s engineering personnel are still based in Tel Aviv, Israel.
Earlier this year, the company rejected a $23-billion acquisition bid from Google, which would have marked the tech giant’s largest-ever takeover. At the time, Wiz CEO Assaf Rappaport said the startup was “flattered” by the offer, but would remain an independent company and aim to list instead.
Speaking with CNBC at Wiz’s new office space in London, Reznik said that the company has received offers from “many people that want to get their hands on Wiz stock” — but that, while “very flattering,” the firm still thinks it can do it alone by going public.
“We’ve already broken a few records as a private company, and we believe we can also break a few more records as an independent public company as well,” Reznik said.
Four-year-old Wiz has raised $1.9 billion in venture capital to date, including $1 billion secured this year in a funding round led by Andreessen Horowitz, Lightspeed Venture Partners and Thrive Capital at a valuation of $12 billion.
In 2022, Wiz said it had reached $100 million in annual recurring revenue (ARR), up from just $1 million in 18 months. At the time, the startup said it was “the fastest software company to achieve this feat.”
Reznik, who is the vice president of research and development at Wiz, said the firm now hopes to double from the $500 million of ARR it achieved this year and hit $1 billion in ARR in 2025, which CEO Rappaport cited as a key condition before the company goes public.
UK expansion
Wiz has been expanding its presence internationally, with a particular focus on Europe, from where it sources 35% of its revenues. Last month, the firm opened its first European office in London.
“I think the talent here is amazing, and the ecosystem is amazing,” Reznik told CNBC. “We have always been very much involved in Europe — and specifically the U.K. — and I feel like it’s a natural evolvement of Wiz to double down even more here in London and the U.K.”
The U.K. represents a major growth opportunity when it comes to cybersecurity, Reznik said, adding that recent events like the cyberattack on National Health Service hospitals and an incident affecting Transport for London have “roof topped” the level of interest in the kinds of products Wiz offers.
“The cloud market is going to reach $1 trillion over the next next few years,” Reznik, who moved from Israel to the U.K. just three months ago, told CNBC. “This year is going to be around $700 million, while security is just 4% out of that, I would say. So that makes it a $30 billion market, which is huge.”
Speaking about the U.K. market, Reznik said: “We see a lot of interest here. Many of the largest banks and retailers, are Wiz customers. But we’re also seeing a huge potential for growth.”
Wiz’s customers include online retailer ASOS and digital bank Revolut as customers in the U.K.
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