On Wednesday, June 14, the Federal Reserve announced a pause in interest rate hikes for the first time since March 2022. The decision comes after promising economic indicators show that relief from historic inflation may be coming.
Inflation Falls from Peak
In a good sign for consumers, the Bureau of Labor Statistics announced on Tuesday that the Consumer Price Index rose more slowly than anticipated for the month of May. Meaning that while inflation is still persistent, the rate at which it is increasing is easing. The Consumer Price Index (CPI), a metric that measures the average change of prices paid by consumers for goods and services, was 4% for the year ending in May.
Inflation has slowed for 11 consecutive months, and the CPI has dropped from its peak of 9.1% in June 2022. The CPI was more than doubled at this same time last year, at 8.6%. When looking at monthly change, prices increased by 0.1% from April to May, less than the 0.2% predicted by economists.
Conclusion
While these are welcome developments, the pause is largely regarded as a chance to assess the effects of the previous rate adjustments and determine whether they were enough to continue the downturn or if more intervention is required. Inflation remains well above the Fed’s goal of 2%, and the interest rate forecast for the year indicates that at least two more rate hikes are in store for 2023.
With the future outlook uncertain, now may be the time to revisit your strategy to take advantage of current rates. Please get in touch with your advisor at FIRM with any questions or to discuss planning for your financial goals.
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