Inflation falls below 3 percent in July, Fed considers rate cut in September

Article

Housing costs are still high, but insurance premiums are finally coming down. (iStock)

The annual inflation rate fell below three percent in July for the first time in over three years, Consumer Price Index (CPI), published by the Bureau of Labor Statistics (BLS).

On an annual basis, prices rose 2.9% in July, a slight slowdown from 3.1% growth in the previous month. On a monthly basis, prices rose 0.2%, after falling 0.1% in June. The last time the headline CPI inflation rate was below 2.9% was in March 2021. Core inflation, which excludes the more volatile food and energy prices, rose 0.2% month-on-month in July.

Inflation is approaching the Federal Reserve's 2% target, but prices for many essential goods remain high. The most difficult piece of the puzzle remains housing costs, which rose 0.4% in July and accounted for 90% of the monthly inflation increase. They also rose more than 5% last year.

“This is significant because it represents an outsized portion of the index, but housing costs are also notoriously difficult to measure accurately and are often perceived as lagging,” said Jim Baird, chief investment officer of Plante Moran Financial Advisors. “Other indicators suggest that housing costs will continue to decline in the coming months.”

Nevertheless, July's inflation figures are likely to give the US Federal Reserve the green light to cut interest rates in September and could lead to further rate cuts before the end of the year.

“Finally, the pace of cash price increases is slowing further after a couple of years of painful increases, signaling a victory for Fed monetary policy,” said Selma Hepp, chief economist at CoreLogic. “For the average American, that means the Fed is likely to cut interest rates next month, which will slightly lower borrowing costs; a good move especially for auto and home sales.”

If you're struggling with high inflation, you might consider taking out a personal loan to pay off your debt at a lower interest rate, thereby reducing your monthly payments. Visit Credible to find your personal interest rate without affecting your creditworthiness.

BEST PRIVATE LOANS IN AUGUST 2024

Car insurance premiums are finally falling

According to Josh Damico, Jerry's vice president of insurance operations, consumers could see some relief in auto insurance costs, which have been one of the biggest drivers of inflation for months. While July's 18.6% increase is still a drag on consumers' wallets, Damico says it's encouraging that the cost spikes are finally starting to ease.

Insurance costs have skyrocketed in recent years as inflation has driven up the cost of auto repairs and drivers have filed more extensive claims. However, auto repair costs and vehicle prices are stabilizing, offering signs of hope, Damico said.

“Several carriers I've spoken with have begun lowering their rates, and many more in our network have told us they are reconsidering price increases they've already made or have planned for the future,” Damico said. “It seems we've turned a critical corner, and American drivers can expect some relief.”

Looking for new car insurance? The Credible marketplace can help you compare multiple providers in minutes.

Let your money grow faster: 5 alternatives to a savings account

Mortgage interest rates are moving in the right direction

Mortgage rates have moved in line with positive economic indicators, and it is becoming increasingly clear that the Fed will begin easing its monetary policy this year.

The decline in mortgage rates and the increasing supply of residential properties are likely to increase the purchasing power of potential home buyers and offer existing homeowners the opportunity to refinance.

“Over the medium term, we expect the economy to strengthen slowly and housing inventory to continue to recover,” said Ralph McLaughlin, senior economist at Realtor.com. “That should put downward pressure on mortgage rates in the fall and winter and set the stage for a much better homebuyer season in 2025.”

If you are looking to purchase a home, you can find the best mortgage rates by comparing prices. Visit Credible to compare your options without affecting your creditworthiness.

SHOULD YOU BUY A HOME IN 2024? WHAT YOU NEED TO KNOW

Do you have a question about finances but don't know who to ask? Email the credible money expert at [email protected] and your question may be answered by Credible in our Money Expert column.