Inflation Rebounds Amid a Softening Job Market
For the first time since September 2022, both CPI and PPI inflation are climbing, with Core CPI and PPI exceeding 3%. This points to persistent inflation, even as the labor market shows signs of strain.
Stagflation Worries
The combination of rising unemployment and increasing prices is stirring concerns of stagflation—a difficult economic situation reminiscent of the 1970s. Temporary help services, a key leading indicator, have been in decline for 23 months.
Fed’s Tough Decision
The Fed is caught in a dilemma: raising rates risks a recession, while cutting rates could fuel inflation further. Despite recent 75-basis-point rate cuts, mortgage rates remain high, and 10-year Treasury yields continue to rise, impacting consumers.
Consumer Sentiment and Future Economic Challenges
With mortgage rates above 7%, declining consumer confidence, and the possibility of another inflation spike in 2025, the Fed faces mounting pressure to curb inflation without deepening the economic slowdown.
This delicate balancing act mirrors past crises. Can the Fed find a way to stabilize, or will it push the economy toward stagflation?