(SPONSORED) — October’s inflation rate shows prices are moderating with several categories still up. Tatiana Bailey, Director of Data-Driven Economic Strategies (DDES) explains what that means and what to look for in the future.
Bailey said prices are finally moderating after rising 8.2% year over year in September to only 7.7% in October. More specifically, food prices are up 10.9%, energy 17.6% and new vehicles are 8.4% among others. That doesn’t sound like good news said Bailey, however, the change in the pattern of price increases is what economists are happy about. Almost all the categories had monthly increases in October that were the same or smaller than the increases in September, with some prices having a decrease from September to October.
The Producer Price Index was released and Bailey explains that it also showed the prices that businesses are paying are starting to cool, which is good news said, Bailey.
“Two important thoughts come to mind around all of this. One, although moderating price increases are a good thing, I carefully watch where savings rates are,” said Bailey.
Bailey said the savings rates are at around 3%, close to where they were prior to the Great Recession.
“I think the Federal Reserve should pause on interest rate hikes,” said Bailey. “The information they use to make decisions is based on lagging data from previous months. So how about if we give the data a chance to catch up and that data is giving us glimmers of hope? It’s a delicate balance, but interest rate hikes that are too aggressive can flip us into a recession. Layoffs and declining homeownership. If we pause, we aren’t taking back the rate increases.”