US Inflation Slowing Much to Americans’ Relief

A growing US economy is allowing the inflation gauge to settle down. However, that could change soon thanks to one overlooked marker.

The personal consumption expenditures price index is up 2.9% for the year. The increase for January is only 0.2%, but it is moving at a rate faster than that of overall inflation. US core inflation was up 0.1%, and that’s down overall from where it was the previous months.

Analysts are calling the current inflation slowdown a “soft landing”, but this indicator’s slow rise could mean that inflation will heat back up again. This marker does not include food and energy but covers other essential consumption metrics that include what people pay for a large variety of goods and services. If that goes up even a little, it indicates that inflation could increase as well, yet this is a marker that many financial analysts will overlook.

They tend to pay more attention to the price of goods in a grocery basket, known as the consumer price index. That’s a metric that many Americans will watch as well, and it gives them a good idea as to where inflation might be headed.

Inflation Looking Healthier

Inflation is high right now, but settling, which is good news for the economy and for the US dollar (USD). If it slows down further or stays at about the same level, that could indicate to the Federal Reserve that it is time to slash some interest rates. The US dollar would benefit from that kind of move as well.

A healthy inflation rate is seen as 2% annually, so the rate and the economy are still in a rough spot. While the rate isn’t there yet, it has shown indications for cooling during several months this year. This is a very important time for the economy, since it is an election year, and the state of the economy will often sway voters. If they don’t think President Joe Biden is doing a very good with inflation and the overall state of the economy, they may not want to elect him for a second term. It is factors like the economy that can hurt a sitting president from gaining reelection.

So, even though the personal consumption expenditures price index is not a major indicator for inflation, if it does continue to change, that can cause a ripple effect that will move the inflation gauge. Watching its movement will tell us something about where inflation will go from here.