Inflation remains high despite some cooling in March, with prices rising at an annual rate of 2.8% excluding food and energy. While spending remains strong, the personal saving rate has fallen as households dip into savings to cope with rising costs. The Federal Reserve will likely continue to raise interest rates to combat inflation, which is still well above its target of 2%.
On Friday, the government will release its latest inflation report, which shows how much prices have changed for things we often buy. This report is especially important to the Federal Reserve, which uses it to make decisions about interest rates. Financial markets will be watching closely to see how inflation has changed because the Fed wants to keep inflation low and stable.
Inflation based on the Fed's index rose in January, primarily due to services costs. Goods prices declined. Despite a surprising increase in income, spending decreased. The tight labor market continues, with slight growth in jobless claims. Inflation is gradually easing, but remains elevated, impacting the Fed's interest rate decisions. The timing and extent of rate cuts remain uncertain.
