US inflation still slowing, but not fast enough for seniors
The spotlight focused on this week’s consumer price report to see if it raises more questions about the Fed’s decision to cut rates so aggressively at its mid-September meeting. Following the blockbuster jobs report last week, a strong inflation reading would reinforce skepticism of that decision. Although the CPI did not slow as much as expected, it did not derail the disinflation process. As advertised, it remains on a bumpy path towards the Fed’s 2 percent target.
What you will learn:
- Although the job market is more resilient than expected, there is some question as to whether the external shocks from hurricanes and the Boeing strike will take a major toll on payrolls in October, which might influence the Fed’s rate decision at its upcoming FOMC meeting in early November. We believe the Fed will keep its eye on the bigger picture, which still looks promising for a soft landing and is consistent with a measured pace of rate cuts in coming months.
- Along with the September CPI data the government revealed the Social Security COLA for 2025. The 2.5 percent increase seniors will receive is less than the inflation rate they faced over the past year, according to an alternative price measure for people over 62 compiled by the government. That measure also shows that the elderly inflation rate has exceeded price gains for the general public for the past two years. Not coincidentally, this population cohort has stepped up its participation in the labor force to supplement lost purchasing power. Since there are more savers than borrowers among older people, the Fed’s rate-cutting campaign may exacerbate this trend.
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