SEPTEMBER 16, 2024 – INFLATION FALLS ENSURING A RATE CUT THIS WEEK
The annual inflation rate for August was reported at 2.5 percent, a 3-year low. The moderate rise has cleared the way for the Fed to lower interest rates. The 2.5 percent figure was the fifth straight annual drop and the lowest it has been since February 2021. On a monthly basis, inflation was up 0.2 percent from July. Core readings, which exclude energy and food, were slightly worse. The annual core increase was 3.2 percent, the same as July, and was up 0.3 percent versus 0.2 percent in July. The Fed believes the core data is a better indicator of future inflation trends.
In other good news, it was reported last week median inflation-adjusted income rose 4 percent last year, matching the 2019 peak. Overall incomes have outpaced inflation for the last 18 months.
Expectations are for a 25-basis point cut this week, with a majority of economists predicting additional 25-basis point reductions at both the November and December meetings. The Federal Funds rate is between 5.25 and 5.50 percent. The European Central Bank lowered rates last week for the second time in 3 months, their key rate now stands at 3.5 percent, after a 25-basis point cut.