The Federal Reserve is widely expected to lower interest rates following its meeting later today for the first time since February 2020, with analysts predicting a cut of either 25 or 50 basis points.
Here's a rundown of America’s current economic situation in the lead-up to the Fed’s decision:
Inflation: The Consumer Price Index rose 2.5% year-over-year in August, down from 2.9% in July and the lowest reading since February 2021. Core inflation, which excludes often-volatile food and energy prices, rose 3.2% year-over-year, unchanged from July.
Retail sales: US retail sales unexpectedly rose 0.1% from July to August after increasing by 1.0% the previous month (the largest margin in a year-and-a-half), according to data published yesterday by the Commerce Department.
Consumer confidence: American consumers’ confidence in current business and labor market conditions rose to a six-month high in August, according to data from the Conference Board. A separate index based on consumers' short-term outlook for income, business, and labor market conditions increased in August to its highest level over the past year.
Stocks: After experiencing declines of 5+% between mid-July and early August, all three major US indexes ended up regaining most or all of that ground through yesterday. Overall, all three indexes are up at least 10% over the year-to-date (S&P: +18.8%; Dow: +10.3%; Nasdaq: +19.4%).
Mortgages: The average rate for a 30-year fixed mortgage fell to 6.2% last week, down from 7.18% one year prior and its lowest level since February 2023, according to data from Freddie Mac.
Jobs: The unemployment rate ticked down to 4.2% in August from 4.3% in July, according to the Bureau of Labor Statistics’ latest jobs report. Overall, America’s jobless rate has risen slightly since reaching a modern low of 3.4% last April.
Looking ahead… The Fed is projected to cut interest rates three times before the end of this year, according to economists polled by Bloomberg.
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