Inflation In the United States is at it's Lowest Since 2021

    Americans are relieved that inflation has hit its lowest point since 2021. Low inflation not only increases an individual's purchasing power (the number of goods and services they can afford with a certain amount of money) but also incentivizes the Fed to lower interest rates. The current inflation rate is between 3 and 4% and was approximately 3.1% in March 2021. The Consumer Price Index (which tracks the average amount individuals spend on goods and services) increased by 3% in June. That is a huge improvement from June 2022, when the inflation rate was close to 9%, and gasoline prices were approximately five dollars a gallon. In order to combat high inflation, the Fed must raise interest rates. However, the Fed may still raise interest rates to a 22-year high in the July 25th to 26th meeting because economic activity hasn't decreased significantly. But the chances of this happening are quite slim, given how low the inflation rate is at the moment. 

    Although hiring slowed in June 2023, employers have made an effort to increase the Labor Force Productivity Rate (the number of people employed or actively searching for jobs) by hiring more young people between the ages of twenty-five and fifty-four. Thus, the US economic output rate has increased by 2.3% and the unemployment rate is at its lowest in recent times (~3.6%). If economic activity remains low, then inflation will continue to decrease accordingly. The Fed prefers to use the Personal-Consumption Expenditures to gauge inflation rates. They also focus on core prices, which exclude volatile food and energy expenditures. The core CPI increased 4.8% in June, which is a huge improvement from the 5.1% figure in October 2021. Core CPI is a better measurement of inflation than other indices because it reduces volatility in the data, thus getting rid of unnecessary distortions in datasets. The Fed has also managed to keep it's Federal-Funds Rate (the rate at which banks give other banks loans) between 5 and 5.25%. Washington is the only state which is struggling right now. Gas prices are $4.96 a gallon, as opposed to the US average, which is ~$3.54 a gallon. Otherwise, price increases have been modest since May, and will continue to be like that as long as low economic activity causes inflation to decrease.