Gas Prices and Inflation: A Turning Point for US Economy?
Gas prices on a sign at a Shell gas station in San Francisco, California, US, on Tuesday, May 23, 2023, may indicate a deceleration in inflation. The question remains whether this deceleration will be enough to convince Federal Reserve officials that they can stop raising interest rates and let the U.S. economy breathe on its own for a while.
Consumer Price Index and Inflation Numbers
The consumer price index, set to be released Tuesday morning at 8:30 ET, is expected to show that all-items inflation increased just 0.1% last month, equating to a 4% annual rate, according to the Dow Jones consensus estimate. Excluding the volatile food and energy components, CPI is forecast to rise 0.4% and 5.3% respectively.
Those kinds of numbers could encourage policymakers that inflation is headed in the right direction, after it peaked above 9% in June 2022. “The most encouraging thing is the year-over-year growth rates are going to come down pretty sharply,” said Mark Zandi, chief economist at Moody’s Analytics. “The headline number is going to feel good, it’s going to be encouraging, showing inflation is moving in the right direction.”
Impact on Interest Rate Hikes
After a year of insisting inflation wouldn’t last, the Fed in March 2022 began what would be a series of 10 interest rate hikes. Since then, inflation has been on a gradual descent, but still far away from the central bank’s 2% target.