Finance
Will October’s inflation increase slow the pace of interest rate cuts?
Housing costs remain a major factor in inflation. (iStock)
Inflation increased to 2.6% in October, rising modestly from the previous month, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS).
In October, inflation was above the annual inflation rate of 2.4% in September, and it increased 0.2% on a monthly basis, according to BLS. The cost of housing was the most significant contributor to the monthly increase in October, accounting for over half of the rise of the monthly all-items index. The price of food also increased by 0.2% in October. Energy prices remained unchanged after dropping 1.9% in the previous months. These lower prices are helping to bring down the overall cost of goods and services, offsetting increases in other parts of the economy.
If the pace of price increases continues to mount, it may influence the Federal Reserve’s pace of interest rate cuts. Last week, the Fed announced a highly anticipated quarter of a percentage point cut, lowering interest rates to between 4.5% and 4.75%. However, inflation has moderated substantially over the last two years, from a peak of 7% to 2.6%. Fed Chair Jerome Powell said the Fed remains committed to maintaining the U.S. economy’s strength by supporting maximum employment and returning inflation to its 2% goal.
“Markets have dialed back expectations for another cut and are currently pricing in somewhat lower ~60% odds of that outcome,” Realtor.com Chief Economist Danielle Hale said. “The November jobs report, due out in early December, is likely to be an important input in that decision alongside the latest inflation reading.”
For now, moderate inflation and the Fed’s dialing back of interest rates are likely to give consumers space to spend as the holiday season approaches, according to Gabe Abshire, CEO of Move Concierge.
“The average American consumer is still feeling the pinch of inflation, but not to the same extent as last year when it greatly hampered monthly household spending,” Abshire said. “As we move into the holiday spending season, we anticipate strong retail sales and a slow winter homebuying season.”
If you are struggling with high inflation, you could consider taking out a personal loan to pay down debt at a lower interest rate, reducing your monthly payments. Visit Credible to find your personalized interest rate without affecting your credit score.
BEST PERSONAL LOANS OF NOVEMBER 2024
Rate cut pace may slow
Bringing inflation down to the 2% target rate is likely to be the biggest challenge, according to Jim Baird, chief investment officer with Plante Moran Financial Advisors. Baird said that adding to the challenge may be how President-elect Donald Trump’s administration’s trade and fiscal policy plays out and the slow pace of cooling in the cost of housing and other services. These factors combined could lead to some volatility in inflation.
While it’s unlikely that the Fed would reverse course on its interest rate cuts, they could slow down the timing and pace of rate cuts next year. The Fed said in September it anticipated that if the economy evolves as expected, the Fed could dial back the federal funds rate to 4.4% at the end of this year and 3.4% by the end of 2025.
“With consecutive rate cuts now in the Fed’s back pocket, there is a broad sense that officials can view further easing through a more critical lens, particularly given the sustained positive momentum in GDP growth,” Baird said. “The economy has continued to grow at a solid pace, lifted by a resurgence in consumption, raising doubts about the ability of or need for short-term rates to be slashed as aggressively as the Fed’s projections have suggested.”
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.
GROW YOUR MONEY FASTER: 5 ALTERNATIVES TO A SAVINGS ACCOUNT
Car insurance prices ease
Car insurance decreased 0.1% in October and the rate of annual increase slowed for a sixth straight month, according to today’s CPI report. That should be welcome news for drivers who have seen insurance costs soar over the last two years.
Insurance costs are still high, but the signs are there that the worst may be over, according to Josh Damico, vice president for insurance operations at Jerry. Damico said that claims-related costs that have driven insurers’ rate increases have stalled or fallen in recent months. Used car prices are down 18% from their peak in early 2022, while motor vehicle parts and equipment rose only 2.3% annually in October after flatlining for most of 2024.
“With claims-related cost pressures easing, many insurers are pausing rate hikes while others are unwinding some of their recent increases,” Damico said. “The rise in repair costs is a bit concerning, but the carriers feel good about vehicle prices and are looking to sell more policies.”
If you want to save money on your car costs, you could consider changing your auto insurance provider to get a lower monthly rate. Visit Credible to shop around and find your personalized premium.
WHY DO MY CAR INSURANCE PREMIUMS KEEP GOING UP?
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
JPMorgan Chase CEO Jamie Dimon said Wednesday the looming tariffs that President Donald Trump is expected to slap on U.S. trading partners could be viewed positively.
Despite fears that the duties could spark a global trade war and reignite inflation domestically, the head of the largest U.S. bank by assets said they could protect American interests and bring trading partners back to the table for better deals for the country, if used correctly.
“If it’s a little inflationary, but it’s good for national security, so be it. I mean, get over it,” Dimon told CNBC’s Andrew Ross Sorkin during an interview at the World Economic Forum in Davos. “National security trumps a little bit more inflation.”
Since taking office Monday, Trump has been saber-rattling on tariffs, threatening Monday to impose levies on Mexico and Canada, then expanding the scope Tuesday to China and the European Union. The president told reporters that the EU is treating the U.S. “very, very badly” due to its large annual trade surplus. The U.S. last year ran a $214 billion deficit with the EU through November 2024.
Among the considerations are a 10% tariff on China and 25% on Canada and Mexico as the U.S. looks forward to a review on the tri-party agreement Trump negotiated during his first term. The U.S.-Mexico-Canada Trade Agreement is up for review in July 2026.
Dimon did not get into the details of Trump’s plans, but said it depends on how the duties are implemented. Trump has indicated the tariffs could take effect Feb. 1.
“I look at tariffs, they’re an economic tool, That’s it,” Dimon said. “They’re an economic weapon, depending on how you use it, why you use it, stuff like that. Tariffs are inflationary and not inflationary.”
Trump leveled broad-based tariffs during his first term, during which inflation ran below 2.5% each year. Despite the looming tariff threat, the U.S. dollar has drifted lower this week.
“Tariffs can change the dollar, but the most important thing is growth,” Dimon said.
There’s a big inherited IRA change in 2025. How to avoid a penalty
Donald Trump has again rewritten the history of January 6th
FASB proposes accounting standards codification changes
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
The Essential Practice of Bank and Credit Card Statement Reconciliation
Are American progressives making themselves sad?
-
Economics1 week agoAlafe Wakili is A Pioneer in African Media and Communications
-
Economics1 week agoSpike in UK borrowing costs raises specter of public spending cuts
-
Finance6 days agoBlackRock predicts another historic year for crypto
-
Economics4 days agoJoe Biden wound up serving Donald Trump
-
Economics1 week agoCPI inflation December 2024:
-
Accounting5 days agoBusiness Transaction Recording For Financial Success
-
Economics6 days ago
How Joe Biden wound up serving Donald Trump
-
Personal Finance6 days agoBiden announces final round of student loan forgiveness