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    The Fed’s Preferred Inflation Gauge Cooled in August

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    Inflation has been slowing for months, which has paved the way for Federal Reserve interest rates cuts.Inflation cooled in August, the latest sign of progress in the Federal Reserve’s yearslong fight to bring rapid price increases back under control.The Personal Consumption Expenditures index climbed by 2.2 percent from a year earlier, data released Friday showed. That is down from 2.5 percent in July and slightly softer than economist forecasts. It was the slowest annual inflation reading since early 2021.After stripping out volatile food and fuel prices for a better sense of the underlying inflation trend, a “core” price index was a bit more stubborn on an annual basis. The core measure came in at 2.7 percent, up from 2.6 percent previously and in line with what economists had expected. But comparing prices from month to month, core inflation slowed to a modest 0.1 percent in August.Altogether, the report offers further proof that price increases are swiftly fading. Already, that has allowed the Fed to begin to lower interest rates from a more than two-decade high of 5.3 percent. After raising borrowing costs sharply and then holding them at a high level to slow the economy and weigh down inflation, officials voted last week to cut rates by a larger-than-usual half percentage point. Policymakers also signaled that more rate cuts are coming, as long as inflation continues to fade.The Fed’s pivot is already helping to bring down mortgage rates, and it could slowly trickle through the economy to stop the job market from slowing more markedly. Central bankers are trying to pull off a rare “soft landing,” in which they cool conditions enough to wrangle price increases without tempering them so much that unemployment spikes and the economy falls into a recession.There were some signs that the economy may be pulling back — but not crashing — in the details of Friday’s report. Consumer spending, which makes up a big part of overall economic activity, grew more slowly in August, the data showed. And personal incomes picked up less than expected.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    What’s Next for Rate Cuts? The Fed Is Watching Jobs and Prices.

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    A Federal Reserve official predicted quarter point rate cuts if data looked ‘fine’. But he also set out a scenario for a pause — or faster reductions.Having made their first interest rate cut in more than four years this week, Federal Reserve officials are keeping their options open as they try to figure out how rapidly to lower borrowing costs in the months ahead.Fed officials could lower interest rates in standard quarter-point increments if the data continue to look “fine,” Christopher J. Waller, a Fed governor, suggested in a CNBC interview on Friday. If inflation were to pick back up, Fed policymakers could hold rates steady.And if the job market cools more than expected or if inflation comes in weaker than expected, the Fed could reduce interest rates more rapidly.“If the data starts coming in soft and continues to come in soft,” Mr. Waller said in the interview, he would be willing “to be aggressive on rate cuts to get inflation closer to our target of 2 percent.”Central bankers appear to be poised to lower borrowing costs much more quickly than most economists had expected as recently as a month or two ago. That has left some questioning what prompted the Fed’s pivot toward a more proactive path. And the Fed’s decision to cut rates by a larger-than-usual half point this week has many investors wondering whether other large moves could be on the table.Mr. Waller’s remarks offer insight into the Fed’s thinking at a critical juncture. Policymakers are trying to bring interest rates — which they lifted rapidly starting in 2022 and have left at a high level since 2023 — back toward a more normal setting, at which the rates no longer weigh so heavily on the economy. But how rapidly to do that is a challenging question.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Interest Rates Fall, but Central Banks Are No Longer in Lock Step

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    Officials in some countries started cutting rates last year, but others, including those in Europe and the United States, have taken a more cautious approach.Two years ago, central banks around the world were engaged in a battle against high inflation that resulted in an aggressive and synchronized jump in interest rates. Now, many policymakers are reversing course — but in a less coordinated way as price increases slow at different paces in various countries.Central bankers in some emerging markets began cutting rates last year. European officials started a slow and cautious easing of interest rates just a few months ago. The biggest outlier had been the Federal Reserve, which had kept rates high for more than a year and throughout the summer. On Wednesday, it joined the crowd and cut rates — in a big way — for the first time since the early days of the pandemic.“A few months ago, we were still in the space of American exceptionalism,” said Katharine Neiss, an economist at PGIM Fixed Income, an asset manager. There was the expectation that the resilience of the U.S. economy would lead to higher rates for longer, she said. “That was creating a lot of stresses and strains for the rest of the world,” she added.If the Fed’s rate cut on Wednesday can ensure a so-called soft landing for the U.S. economy, where inflation is brought down without a severe recession, then that is “really good news for the rest of the world,” Ms. Neiss said. It also eases global financial conditions and reduces pressure on currencies that were taking a hit from the dollar’s strength.Now, the dominant theme around the world is central banks lowering interest rates as inflation slows, falling within sight of their targets, and economic growth weakens. Still, policymakers have been cautious about moving too quickly and reigniting inflationary pressures.The Bank of Canada has cut rates three times since June. Last week, the European Central Bank cut interest rates for the second time in three months. The Bank of England held rates steady on Thursday after cutting just once last month.Central banks in Norway and Sweden are also expected to hold rates at their meetings later in September, emphasizing their gradual approach. Among emerging markets, the South African central bank cut rates for the first time in four years on Thursday.Still, there are global outliers. Japan belatedly responded to rising inflation by raising rates in July. Investors suggest that the Bank of Japan is more likely to raise rates again in the near future. Nigeria has been raising rates this year as inflation has jumped and, late on Wednesday, Brazil’s central bank raised rates amid concerns that faster economic growth could be inflationary. More

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    After Fed Cuts Rates, Biden Will Claim Credit for Economy’s Strength

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    The president’s speech on Thursday won’t be a “victory lap,” officials said, but it will celebrate falling inflation and borrowing costs along with solid growth.President Biden is set to declare on Thursday that the economy has finally reached a turning point he has long sought. With price growth cooling and borrowing costs beginning to fall, he will cast the economic moment as vindication for his often-criticized management of the recovery from the pandemic recession.But Mr. Biden will stop short of “declaring victory” over inflation in his speech to the Economic Club of Washington, administration officials said.Instead, the president will stress the need for further action to bring down the costs of housing, groceries and other daily necessities that continue to frustrate American consumers. That is a nod to the politics of price growth, which are challenging for Vice President Kamala Harris as she seeks to succeed Mr. Biden in the November presidential election.“The president knows this is no time for a victory lap, which is why he will talk about the work ahead,” Jeffrey Zients, the White House chief of staff, told reporters on Wednesday.Still, Mr. Biden appears poised to more boldly claim credit for the economy’s performance than he has in recent months. The president and Ms. Harris have struggled to shake off voter discontent over an inflation surge earlier in his presidency that has left many Americans with a lingering case of sticker shock.In recent weeks, the president has been buoyed by a run of good news on prices, including for gasoline, groceries and the overall inflation rate, as well as the first report of rising real incomes for the typical American since the pandemic began. Mortgage rates have fallen from their recent highs, and on Wednesday, the Federal Reserve cut interest rates by half a percentage point and signaled further cuts this year.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    How Inflation and High Interest Rates Have Changed the Economy

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    As inflation cools and the Federal Reserve cuts rates, an era of economic upheaval is coming to a close, but not without lingering marks.People with jobs have started showing up at homeless shelters in Atlanta. Families who can’t cover their grocery bills are pushing up demand at a Boston food bank. A dearth of available houses is plaguing Sacramento. Yet reports of recent raises abound, and a partly retired homeowner near Pittsburgh is happy about his savings.America’s bout of painfully high inflation — and the period of high interest rates meant to cure it — is finally drawing toward a close. Price increases are nearly back to a normal pace, so much so that the Federal Reserve voted on Wednesday to lower borrowing costs for the first time in more than four years.But even as the nation’s tumultuous pandemic economic era begins to approach its end, the period is destined to leave lingering marks.There are many things to celebrate about the current moment. Inflation has so far cooled without a major economic pullback, a development few economists thought possible. Consumers are still spending at a solid clip. Years of strong job growth and solid wage gains have lifted up many workers, and a run-up in stock prices is padding retirement accounts.The Greater Boston Food Bank has delivered more than 100 million pounds of food every year since 2020, up from less than 70 million in 2019.Sophie Park for The New York TimesYet the past several years have also brought serious and lasting challenges. Prices remain sharply elevated compared with their prepandemic levels, and many families are still struggling to adjust. Some have seen their wages fall behind costs. For others, pay gains have kept pace with inflation, but the memory of cheaper egg and rent prices endures, leaving an ongoing sense of sticker shock. And across the country, housing affordability has tanked, a trend that could take time and even policy changes to reverse.Grocery Inflation Jumped, Then CooledGrocery inflation was even more rapid than overall price increases in 2022, though it has recently calmed notably.

    Source: Bureau of Labor Statistics Consumer Price IndexBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Fed Cuts Interest Rates for First Time in Four Years

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    Fed officials kicked off rate cuts with a half-point reduction, confident that inflation is cooling and eager to keep the job market strong.The Federal Reserve cut interest rates on Wednesday by half a percentage point, an unusually large move and a clear signal that central bankers think they are winning their war against inflation and are turning their attention to protecting the job market.“Our patient approach over the past year has paid dividends,” Jerome H. Powell, the Fed chair, said during his news conference. But now “the upside risks to inflation have diminished, and the downside risks to unemployment have increased.”The Fed’s decision lowers rates to about 4.9 percent, down from a more than two-decade high.The pivot comes in response to months of fading inflation, and it is meant to prevent the economy from slowing so much that the job market begins to weaken more painfully. Officials have been keeping a careful eye on a recent uptick in the unemployment rate, and by starting off with a big cut, the Fed is in effect taking out insurance against a bigger employment slowdown.Reinforcing that cautious message, the decisive reduction came alongside economic projections that suggested a more rapid pace of rate cuts than officials had envisioned just a few months ago. Officials now expect to make another half-point reduction before the end of the year.“We’re going to take it meeting by meeting,” Mr. Powell said. “We made a good, strong start to this, and that is frankly a sign of our confidence, confidence that inflation is coming down.”Jerome H. Powell, the Fed chair, said that the central bank would take future interest rate cuts “meeting by meeting” after lowering rates by a half percentage point, an unusually large move.Tom Brenner/ReutersWhere Fed Officials Expect Rates Will Be More

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    Cheaper Mortgages and Car Loans: Lower Rates Are on the Horizon

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    The costs of 30-year mortgages and new car loans have been inching down in recent months, welcome news for borrowers who have endured years of high prices and high interest rates. These borrowing costs are expected to fall further: The Federal Reserve is poised to cut its benchmark interest rate on Wednesday, and officials are […] More