Tomorrow, on September 11th, the Consumer Price Index (CPI) data for August will be released, which is considered one of the most influential economic indicators in the United States. The CPI tracks the price changes of a wide range of goods and services including groceries, rent, healthcare, providing important clues for the future direction of the American economy.
This report is being released just before the Federal Reserve’s meeting on September 17th, drawing significant attention from the market and the public.
Stephen Kates, an analyst from the American financial services company Bankrate, stated that the CPI report on Thursday will be “one of the most influential reports of the year,” especially as concerns rise about the prospect of essential items such as groceries and utility services potentially accelerating in price, particularly amidst slowing job market growth and rising unemployment rates.
For consumers, the CPI data being released tomorrow will directly impact your wallet.
If the inflation data is higher than expected, it could mean that groceries, rent, and other living costs will continue to rise, further squeezing household budgets.
Conversely, if the data shows that inflation is slowing down, it may provide the Federal Reserve with more room to cut interest rates, thus lowering borrowing costs, especially for households with credit card debt or planning to finance a car purchase.
In the long run, the Federal Reserve’s interest rate decisions will affect the cost of mortgages, car loans, and personal loans.
Despite ongoing inflation pressures, market expectations for the Federal Reserve to cut interest rates remain strong.
According to real-time data from the Chicago Mercantile Exchange’s FedWatch, as of the morning of September 10th, the market believes there is a high likelihood of a 0.25 percentage point rate cut by the Federal Reserve on September 17th, reaching up to 90%. This would lower the Federal Reserve’s benchmark interest rate from the current range of 4.25% to 4.5% to 4% to 4.25%, thereby reducing borrowing costs for credit cards, car loans, and other forms of financing.
The impact of the rate cut won’t be immediately apparent for ordinary families.
Credit card interest rates may slightly decrease within one or two billing cycles, while adjustments in car loan and personal loan rates may take several months.
Additionally, the initial amount of savings may be limited, such as a few dollars reduction in monthly credit card bills, but with further rate cuts expected in the market, the savings may gradually increase. It is anticipated that by 2026, the Federal Reserve may cut rates one to two more times.
Federal Reserve Chairman Powell has described the current interest rate level as “restrictive,” stating that in the backdrop of a weak job market, rate cuts are aimed at preventing further economic slowdown.
Fed Governor Waller expressed support for rate cuts in a CNBC interview last week, saying, “The labor market is clearly weak, and when it starts weakening, it usually deteriorates rapidly. Therefore, I believe we need to start cutting rates at the next meeting.”
Waller also mentioned that tariffs may push up prices, but he believed this impact might be one-time rather than a continuous source of inflation. He stated that there are no signs of recession in current economic forecasts, but tariffs could lead to a slowdown in economic growth.
A report released by the US Department of Labor on Wednesday, September 10, showed that the Producer Price Index (PPI), which measures the costs of goods and services inputs, decreased by 0.1% month-on-month in August, significantly lower than the expected 0.3% increase, marking the first decline in four months and providing more reasons for the Federal Reserve to cut rates this month.
(This article referenced relevant reports from CNBC)