TAMPA, Fla. — In a newly released report from the U.S. Bureau of Labor Statistics, the Consumer Price Index dropped 0.1% from May. That’s the first time prices fell since the start of the COVID-19 pandemic.
“The CPI came out, I think the inflation rate was 3% year over year. That’s from June this year to June last year, prices have increased about 3%,” said Thomas Stockwell, Assistant Professor of Economics at the University of Tampa.
This is slightly better than what economists had been predicting.
“Most economists were projecting about 3.1%,” said Stockwell.
This drop could be a sign that inflation is cooling after an unexpected surge earlier this year.
Now, some experts believe this could pave the way for the Federal Reserve to make interest rate cuts after months of speculation.
“The Fed has been talking bout reducing interest rates, and that’s great news for consumers,” said Leslie H. Tayne, Financial Attorney and Credit and Debt Expert.
This would make borrowing money less expensive, especially for consumers looking to make big-ticket purchases.
“What they’re talking bout is a quarter point reduction, and while that’s not necessarily significant, it is a good step in the right direction for those who are keeping an eye on the interest rate,” said Tayne.
It could also come with some potential impact on different financial aspects depending on how much rates are lowered.
“That could mean that you have a reduction in interest rates on your savings accounts and CDs. Certain investments you could see the interest rates go down. So if you’re living off those investments it’s a really good time to start thinking about how to maximize the investments at this time. Putting more money into the higher interest rate CDs and locking in higher interest rates,” said Tayne.
Some economists think the Fed could lower interest rates at its meeting at the end of July.
However, others believe it’s much more possible there won’t be a cut until the September Fed meeting, with the potential for another one in December.
“In general, with inflation coming down and the labor market still maybe not as strong as it was a year ago but still relatively strong compared to historical trends, we’re in a decent place right now,” said Stockwell.
However, Stockwell stresses the process of lowering interest rates shouldn’t be rushed.
That’s because there’s a chance inflation could spike if interest rates are cut too quickly, negatively impacting consumers.
“The economy is more than just the stock market. The economy is everyday Americans like you and me. Don’t drop interest rates too early and risk bringing inflation back,” said Stockwell.
“When the typical everyday American is sitting here struggling to afford rent, struggling to buy groceries, struggling to pay for gas. You know insurance is through the roof. All these things are incredibly expensive and incomes really haven’t kept up to offset those price increases. If we bring more inflation back, that is really going to be a huge detriment to the everyday American,” he added.
