Inflation is the word of the week. On Thursday, the Labor Department will release the much anticipated Consumer Price Index (CPI), which will show how much more we are all paying for clothes, groceries, and other items. This week's CPI report will be very important, not just because we are all interested in learning how much our wallets have been getting slammed, but also because it will show if the Fed's inflation fight is actually making any headway and influence the Fed's next moves.
Currently, inflation is up 8.3% since last year, and economists are expecting that number to decline to 8.1%. While that's still high, it would mean costs are finally coming down.
And you know what else that means? That the Fed's aggressive rate hikes are working, which have been painful for anyone interested in buying a house, borrowing money from a bank, or holding credit card debt.
But don't think that declining inflation will be the end of the Fed's rate hikes. Policymakers at the central bank have made it clear they won't stop hiking rates until inflation is closer in line with their target of 2%.
Rate hikes haven't just hurt those of us trying to secure a loan from the bank. It also hurts investors, since they take a chunk out of corporate profits. Most of all, they raise the likelihood of recession. So inflation dropping is a good thing, as the Fed might not be as aggressive in its inflation hike, raising hopes that we could avoid a recession after all.
Investors will also keep an eye out on the Producer Price Index (PPI), which measures inflation at the wholesale level, and retail sales due on Friday could indicate how much inflation has weighed on fellow shoppers.
- Kristin
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