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Wednesday’s big CPI inflation report could mark a change in thinking for the Fed
The news Tuesday was good for inflation, and investors hope it will get even better Wednesday when the Labor Department releases the July consumer price index report.
With the score being one down, one to go on confirming that the early-year jump in prices either was a fluke or the last gasp of inflation, a positive CPI reading could mean the Federal Reserve is able to turn its gaze to other economic challenges, such as the slowing labor market.
“At this point, the inflationary pressure that we saw build has really been dissipated significantly,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Inflation is almost a nonissue at this point. There’s this broad expectation that the worst is easily behind us.”
Like others on Wall Street, Baird expects the Fed in September to shift its focus from tight policy to tackle inflation to a somewhat easier stance to head off a potential weakening in the jobs picture.
While consumers and business owners continue to express concern over high prices, the trend indeed has shifted. Tuesday’s producer price index (PPI) report for July helped confirm optimism that the elevated inflation numbers that began in 2021 and spiked again in early 2024 are in the rearview mirror.
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