Faster-Than-Expected Inflation Drop Lowers Recession Odds, Pauses Expected Fed Rate Hikes
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Inflation dropped much faster in 2023 than expected, making a recession unlikely and a Fed rate hike this week improbable.
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Prices are still higher than a few years ago, but rising at a slower pace, bringing stability to budgets and the economy.
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The Fed will likely leave rates unchanged at this week's meeting and wait for clear evidence that inflation is fully under control before considering rate cuts.
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There has been progress since inflation peaked in June 2022, with cooling gas prices, supply chain improvements, and more normal wage growth.
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Key areas like consumer spending and hiring remain strong despite high interest rates, so the Fed is unsure how responsive the economy is to tighter policy.