Written by Hans Wilder 03/30/2024 NYC
Alright, folks, let’s dive into the economic rollercoaster ride that’s keeping us all on our toes. The Federal Reserve, those fine folks who love to tinker with interest rates, have been eyeing inflation like a hawk, and the latest numbers suggest it’s still being a bit stubborn.
So, this Personal Consumption Expenditures thing, the Fed’s favorite yardstick for measuring inflation, showed a rise of 2.5 percent in February compared to the previous year. That’s just a tad higher than what they aim for, which is 2 percent. Economists saw it coming, though, no surprises there.
Now, if you strip away the volatile stuff like food and fuel, you get what they call the “core” index, and that’s up 2.8 percent. Not too far off what the eggheads were predicting, and a bit cooler than the month before.
Sure, these numbers aren’t as wild as the highs we saw back in 2022, when inflation was soaring like a rocket. But it’s enough to make those Fed folks a bit antsy as they ponder their next move.
See, they’ve been hiking up interest rates like there’s no tomorrow, reaching about 5.3 percent by last year. And now they’re contemplating when to ease up, but they’re not about to do it without a clear sign that inflation’s on a leash.
They’re caught between a rock and a hard place, these central bankers. Leave rates too high, and they could stifle the economy. Lower them too early, and inflation might just rear its ugly head again. It’s a delicate dance they’re doing, trying to find that sweet spot.
And while they’re mulling over all this, they’re keeping an eye on how we’re all spending our hard-earned cash. Seems like we’re still splurging, with consumption up by a solid 0.8 percent in February. Even after factoring in inflation, we’re not holding back.
And let’s not forget about jobs. The labor market’s holding steady, though job openings aren’t quite as abundant as they were a year or two ago. But if hiring slows down too much, the Fed might start thinking about hitting that interest rate button sooner rather than later.
Now, investors are placing their bets on a rate cut in June, after the Fed’s next powwow in May. But who knows? With inflation being the fickle beast it is, anything could happen between now and then.
Ah, the joys of economics. Never a dull moment, folks. Never a dull moment.
