Inflation Finally Starts Falling, Fed Might Ease Off Rate Hikes

Inflation and consumer prices are finally falling. This is great news for consumers and the Federal Reserve alike. But is this pattern likely to last?

Reports from July indicate that the US dollar finally stopped dropping in value at such a fast rate last month, with the Federal Reserve’s aggressive interest rate hikes bringing the dollar under control. This has coincided with falling consumer demand and retailers discounting overstocked goods to offload their over-ordered supplies.

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Gas prices are dropping, supply chain conditions are improving, and the long lines of boats unloading at US ports are getting shorter. In a nutshell, it looks like the US economy will stabilize after spending over two years teetering on the brink of a recession. It’s okay to let out a long sigh of relief now as you survey the economic landscape. “Things are moving in the right direction,” says Jefferies’ chief economist, Aneta Markowska. “This is the most encouraging report we’ve had in quite some time.”

Read More: Check out the latest Mind Your Dollars stock and financial news.

Other numbers are even more encouraging. The Bureau of Labor Statistics report on the Consumer Price Index showed that prices jumped by 8.5% in July, which is still high, but much better than June’s 40-year high of 9.1%. It’s also better than economists predicted. According to Bloomberg, experts predicted that the CPI would still notch an 8.7% increase over this time last year. 

Economy Finally Starts to Cool Off

The economy has been running red-hot since the widespread lockdown of March 2020 started easing. Those lockdowns caused a bottleneck in demand that snapped like a rubber band when conditions improved in the global economy. That, in turn, snarled global shipping lanes and put massive pressure on the manufacturing sector. 

Experts have been quick to point out that some volatile elements of the economy are still feeling the sting of inflation, despite the good news at the gas pump. “The drop in gasoline prices has been very welcome, but that doesn’t solve the inflation problem,” explains Greg McBride, Bankrate’s Chief Financial Analyst. McBride pointed out that groceries are still up 6% over 2022, even with the other good news in the inflation report. “Consumers are getting a break at the gas pump, but not at the grocery store.”

Others also pointed out that the cost of housing is still staying high. This is a massive drain on the economy, as the slowdown in the housing market can have ripple effects on everything from the banking industry to construction companies. That’s not to mention how tough it can be for working-class families to find shelter when prices are so inflated. 

Fed Might Get the Soft Landing

Still, this news is encouraging for experts who were hoping for the Fed to get its “soft landing”. This is a scenario in which the economy stabilizes before constant interest rate hikes send the labor market into a downturn. Often, the only way for a central bank to address inflation is to essentially cause a recession. Thankfully, it looks like the Fed might not need to do that now.

“This is a necessary print for the Fed, but it’s not sufficient,” Barclays Plc’s head of inflation market strategy, Michael Pond, told reporters. “We need to see a lot more.” It’s understandable for investors to maintain a cautious amount of optimism and a healthy amount of skepticism. After all, a single month’s data point isn’t exactly a trend–and things could easily go back to being bad again in August. However, with the Federal Reserve aiming to carefully steer the economy back onto the right track, it’s okay to be a little optimistic.

The Fed has stated it would like to see several months of recovery before it changes its quantitative tightening strategy. Until then, expect to see further interest rate hikes and other economy-shrinking measures from the central bank. 

TikTok Parent ByteDance Acquires Hospital Chain

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ByteDance is the latest tech company to purchase a healthcare chain, joining companies like Amazon. ByteDance’s healthcare unit Xiaohe Health has acquired Amcare Healthcare, a company started in Beijing in 2006, for $1.5 billion. A spokesperson for Xiaohe Health confirmed the purchase, which positions ByteDance as a major player in several industries of the global economy.

In July, Amazon announced it was acquiring healthcare conglomerate One Medical for an eye-opening $3.9 billion, expanding into the lucrative healthcare space. Many onlookers noted that this move looks somewhat dystopian, as Amazon already has such a massive footprint in American society.

Apple, likewise, is pushing to expand its role in the healthcare industry. Its Health app is one of its most popular software features, using biometric data from smartwatches to help users keep track of their exercise and sleep. Apple’s CEO, Tim Cook, once suggested that the company’s “greatest contribution to mankind” will be “about health.” One thing is certain: these tech companies think there’s money to be made in the healthcare sector.

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