Inflation Trending Down
As expected, inflation continues to trend down after an unprecedented rate hike cycle by the Federal Reserve. Given that energy prices are softening, consumers are more cautious, mortgage rates are higher, a general headwind of higher borrowing costs, we expect inflation to continue to moderate. This will have an impact not only on prices, but also on short term fixed income rates, which we are watching very carefully.
We’ve invested based on the assumption that inflation may come down and we’re beginning to see this is occurring. A recent CNBC article highlighted this week’s inflation report. You can find an excerpt below.
The inflation rate cooled in May to its lowest annual rate in more than two years, likely taking pressure off the Federal Reserve to continue raising interest rates, the Labor Department reported Tuesday.
The consumer price index, which measures changes in a multitude of goods and services, increased just 0.1% for the month, bringing the annual level down to 4% from 4.9% in April. That 12-month increase was the smallest since March 2021, when inflation was just beginning to rise to what would become the highest in 41 years.
Excluding volatile food and energy prices, the picture wasn’t as optimistic.
So-called core inflation rose 0.4% on the month and was still up 5.3% from a year ago, indicating that while price pressures have eased somewhat, consumers are still under fire.
All of those numbers were exactly in line with the Dow Jones consensus estimates.