Prices on consumer goods rose 3.1% in January compared to the same period from a year ago. Still, inflation rates are generally considered to be on the decline. However, after the price drop between November and December, economists expected it to continue, not increase.
The seemingly steady decline in inflation is giving the Federal Reserve comfort as they begin to discuss the possibility of lowering interest rates. Up until now, the labor market and economy have been relatively strong. The continuing decline of inflation makes them more comfortable with cutting rates by the end of spring or early summer.
Traders on the stock market responded by dumping some bonds in response to the tepid report. Though improving, traders expected more and had to adjust to calm fears of a stall in the economy. The market rebounded, but the still high rates and lingering inflation negatively impacted the Black economy.
It is imperative to recognize that inflation exacerbates existing economic disparities and perpetuates socio-economic inequality. On average, Black households face 13.5% higher inflation volatility. Housing costs and food prices are vital areas where these disparities are most pronounced. The continued cooling of inflation coupled with the Federal Reserve cutting rates would help alleviate financial woes for many Black households.
While the Federal Reserve has decided to remain cautious by not cutting interest rates at the moment, there is cause for hope. With economic and labor markets staying strong and inflation coming down, the likelihood of interest rate cuts and lower prices is growing stronger.