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Gas prices are a hot topic of discussion lately, and for good reason. A closely watched Labor Department report set to be released soon is expected to show that not much progress is being made in the battle to bring down inflation. This news is concerning for consumers, market participants, and Federal Reserve officials who are eagerly awaiting signs that price increases will slow down enough to allow for gradual interest rate cuts later this year.
The consumer price index (CPI), which measures the costs of a wide-ranging basket of goods and services in the U.S. economy, is expected to see increases of 0.3% for both the all-items measure and the core measure that excludes food and energy. This would put inflation rates at 3.4% and 3.7% respectively, still a far cry from the Fed’s 2% target.
Progress, but not enough
Despite progress from the peak inflation rate above 9% in June 2022, the pace of improvement has slowed in recent months. While the Fed has halted interest rate hikes and inflation has come down, it has not dropped enough to convince officials that a rate cut is warranted. The central bank is looking for sustained evidence that inflation is heading back towards 2% before making any significant moves.
The Commerce Department’s personal consumption expenditures index, a key indicator for the Fed, is showing headline inflation running at 2.5% and the core rate at 2.8% in February. The markets are anxiously awaiting the CPI report as it will provide valuable insights into the state of inflation and its impact on policy decisions.
What to watch
When analyzing the upcoming report, keep an eye on trends in areas such as shelter, airfares, and vehicle prices. These categories have been closely monitored during the current economic cycle and could provide clues to longer-term trends. In particular, changes in rental costs, air travel-related expenses, and vehicle prices will be key indicators to watch.
Additionally, pay attention to the National Federation of Independent Business survey and consumer sentiment data, as they can offer valuable insights into the impact of inflation on small businesses and the general public. Gas prices will also be an important factor to consider, especially after a significant increase in February.
Stay tuned for the latest updates on the economy and investment opportunities on Extreme Investor Network!
