There have been rumblings about interest rates starting to go down soon. But now that more data is available to analyze, what are economists thinking?
Here are Five Fast Facts about the speed of interest rate cuts:
- 📉 Down-flation - Inflation continues to trend downward. Kind of. In December, it actually ticked up a wee bit (3.4%, up from 3.1%), but economists think the overall trend is still positive (meaning downward). Not that paying the bills isn’t still hugely painful, of course.
- 💵 Overall Prices - Part of the reason they think this is because overall prices seem to be leveling out, just 3.2% higher than last year. Oh, that’s all? Let’s have a party.
- 🏪 Core Prices - Taking out the volatile prices of energy and food, core prices also ticked up a tiny bit (0.3%, to 3.2%), but it’s a slower rate of growth than last month and the whole of last year. Silver lining, we suppose.
- 👓 It’s A Perception Thing - Perception is key. If consumers think prices are going down, they’ll spend more, which helps drive prices down. Self-fulfilling prophecy!
- 🤓 The Experts Say - Put all of this together, and economists think we may be able to finally pull out of the terrible grip of inflation without formally dipping into a recession or having huge job losses. Inflation was 1.9% over the last six months, just under the normal target of 2%. This is what’s prompting them to think interest rates can get cut soon. They’re not saying for sure, of course, just hinting. Wouldn’t want to stake a reputation on definite predictions, you know.
🔥Bottom line: Of course we want interest to go down - that’ll make things less painful since we’ll get to keep more of our Paychecks! It seems likely there will be at least a “soft landing” so that’s great. And the sooner it happens, the better.
How much would lower interest rates help you out?
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