They say this is good economic news. It might not feel like it
Earlier in December, CNN’s Christine Romans wrote about the “yes, but” economy.”Yes, the economy is strong,” she said. “But it comes with a lot of caveats.”Here’s a riff on that for this week: There’s some good news to report, but questions and caveats are looming in the future.Yes, inflation is coolingWell, maybe it’s more accurate to say inflation’s not boiling quite as much. CNN’s Alicia Wallace wrote Tuesday that the Consumer Price Index showed inflation slowing more than many economists expected.”Prices rose 7.1% annually in November, down from 7.7% in October, according to the Bureau of Labor Statistics’ closely watched index, which measures the change in prices paid by consumers for goods and services,” she wrote.That means inflation has been slowing for five straight months and is down from this year’s peak of 9.1% in June.Energy prices in particular are down. It’s cheaper to buy gas today than it was a year ago.But the Fed is not convincedThe Federal Reserve announced it would hike interest rates another half of a percentage point on Wednesday and that it would not consider inflation to be tamed until it falls to a sustained 2% in a different index, the Personal Consumption Expenditures.That means the Fed is still rooting for somewhat higher unemployment rates and slowing the economy.Stocks, which had risen on the “inflation is cooling” news Tuesday, were down Wednesday on the “Fed is not convinced” development.Federal Reserve Chair Jerome Powell made clear Wednesday that more interest rate hikes are on the way in 2023.”We still have some ways to go,” he said.And he further predicted there would be no rate cuts in 2023.chief economist of Moody’s Analytics, says in her story. “In the coming decade, they’re going to be fighting hard to get inflation down.”In the meantime, cooling inflation might be praised by policymakers, but it could rub everyone else the wrong way, especially if an economic slowdown starts to feel like a recession. That’s the kind of perception that can continue to move elections.
This article was originally published by CNN.
