CPI report shows inflation may be starting to cool

The latest consumer price index report (CPI), released Thursday, showed that inflation is starting to cool. CNBC reports that the CPI increased by 0.4 percent this month and 7.7 percent since last year, less than the predicted growth of 0.6 percent and 7.9 percent, respectively.

This is the lowest annual inflation reading since January, per CNN. In response, the Dow Jones Industrial Average increased by over 800 points and the S&P 500 opened with a gain of 3.6 percent. This reflected hopes that the Federal Reserve would cut back on raising interest rates. "The report provides ammunition for the Fed to begin pricing in sub-75-basis-point tightening," explained Eric Merlis of Citizens.

While slow growth is good news, it is growth nonetheless. "This morning's CPI data were a welcome relief," commented Lorie K. Logan, of the Federal Reserve Bank of Dallas, "But there is still a long way to go." Inflation is still expected to increase in 2023, reports The New York Times. "In categories that are necessities — shelter, food, and energy — we continue to see large and consistent increases," says Greg McBride, chief financial analyst at Bankrate.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

The economy is resilient, pushing up prices consistently, so the Fed is not likely to end interest rate hikes just yet, experts say. Michael Arone at State Street Global Advisors explained, "Investors are still gullible and they are still impatiently waiting for the Powell pivot, and I'm not sure it's coming anytime soon."

Despite this, many like Neil Dutta at Renaissance Macro are hopeful. "Inflation is slowing and there is room for the good news to continue in the coming months."