A key metric suggests prices are returning to normal levels: 'Mission accomplished,' says economist

Original Article:

Source: Link

After two years of interest rate hikes, inflation has seemingly been tamed, according to some experts. Year-over-year prices have receded to a rate of 2.9%, according to the latest consumer price index report, which measures the cost of everyday goods and services. This suggests that while prices for things like rent, groceries and services will remain high, they aren't accelerating like the were two years ago, when inflation reached a peak of 9.1% in June 2022. While the latest reading is still short of the Federal Reserve's target rate of 2%, the last time inflation was this low was March 2021. It's "time for the Fed to declare 'mission accomplished,'" says Julia Pollak, labor economist at ZipRecruiter, who argues the central bank should start cutting interest rates in September. DON'T MISS: How to be more successful with your money To combat inflation, the central bank enacted 11 consecutive interest rate hikes between March 2022 and July 2023, raising its effective benchmark rate from near zero to 5.33%. Since then, the Fed has held interest rates steady. Rate hikes help curb inflation by making borrowing more expensive, but they can also slow down economic growth. They can make things worse for consumers as well, by increasing the costs of mortgages, credit cards and other loans. Additionally, they can discourage business investment, leading to fewer jobs and slower hiring. "If the Fed keeps its foot on the brake pedal, the labor market will continue to slow," says Pollak about current interest rate levels. A rate cut of at least 25 basis points is widely expected in September.