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. This article originally appeared in ‘The Balance Today’ newsletter. You can get ‘The Balance Today’ delivered to your inbox daily, just sign up here.
