🔷 Rising Inflation + Weakening Labor Market
Both CPI and PPI inflation are back on the rise for the first time since September 2022, with Core PPI and CPI above 3%—signaling stubborn inflation even as labor market shows cracks.
🔷 Stagflation Concerns
Rising unemployment coupled with increasing prices echoes stagflation, a challenging economic condition last seen in the 1970s. Temporary help services jobs, a leading indicator, have dropped for 23 months.
🔷 Fed's Lose-Lose Dilemma
Rate hikes could trigger a recession, while cuts could worsen inflation. Despite recent 75 basis point cuts, mortgage rates are up, and yields on 10-year notes are climbing, hitting consumers hard.
🔷 Consumer Confidence and Economic Outlook
With 7%+ mortgage rates, waning confidence, and potential for another inflation wave in 2025, the Fed faces mounting pressure to stabilize prices without pushing the economy into a deeper downturn.
This balancing act is reminiscent of past economic crises—will the Fed find a middle ground or plunge into stagflation territory?