ATLANTA — Tuesday’s release of the Producer Price Index, which tracks wholesale prices, shows that the cost of goods for businesses are starting to see relief from inflation.
While many economists are saying inflation is clearly dissipating, some consumers still say they’re worried about higher prices.
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Channel 2′s Justin Farmer spoke to Dr. Tom Smith, an Emory University economist, who said the latest PPI from the Bureau of Labor Statistics is good news for shoppers.
The cost of goods inflation rate now sits at 2.2%, showing it’s really cooled off and inflation has significantly slowed down. Inflation is cooling, economists are saying, and this time it looks like it could be real.
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“The Fed has been throwing around ‘soft landing’ and I think that’s a great description,” Smith told Channel 2 Action News. “I do believe the Fed is going to cut rates this fall.”
A soft landing refers to an economic slowdown that avoids a recession.
The PPI on Tuesday was very close to the target inflation number sought by the Federal Reserve, which is 2%. This type of report shows the Fed the kind of data that has economists nearly unanimously saying we’ll see an interest rate cut when the Fed meets in September.
“A lot of economists trying to figure between a 25 or 50 cut, a 50 [point] cut would push into Q4 with a lot of momentum,” Smith said.
As far as points, how many basis points the Fed might knock down interest rates by will be clear in the Federal Open Market Committee meeting coming on Sept. 17.
With the lower costs, businesses may even start discounting prices.
Still, a lot of consumers say they’re still feeling squeezed by the cost of housing, and insurance, so there’s still more work to be done.
Multiple reports from BLS month after month have shown housing is persisting as the largest driver of inflation in the United States. In the July Consumer Price Index, the costs of shelter, auto insurance, household furnishings, school, recreation and personal care were all up, according to BLS.
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