Inflation falls, economists ponder impact on mortgages and retail costs

WASHINGTON (TN) — Inflation has just hit its lowest level since 2021, with the consumer price index falling to 2.9% from 3% in June.

Tom Smith, a finance professor at Emory University, said the continued decline in inflation suggests the Federal Reserve could cut interest rates as early as September.

Maybe somewhere around 25 basis points or maybe a little over 50 basis points,” Smith said.

A cut that, according to economist Nicholas Economides, would have a significant impact on mortgages.

“This affects millions of consumers who want to buy a home,” Economides said.

According to Ecomides, not only mortgages are likely to be affected, but also retail prices.

“This will have an impact on retail prices in general, but it may take several months for this effect to become visible,” Economides said.

As for what impact a drop in inflation below three percent today will have on Americans, Smith said there won't be much change at the store level because prices are still rising, but not as quickly.

“Inflation is still there. Prices are rising. They're just rising much more slowly than before,” Smith said.

While store prices may rise moderately, Smith said, your salary will also increase.

“Wage increases are above the rate of inflation, so people have more money in their pockets and can buy more things with their money overall,” Smith said.