Fed’s Preferred Inflation Gauge Cools

The Federal Reserve's preferred inflation measure indicates that inflation has remained low, with a 0.1% increase in prices from May to June and an annual inflation rate of 2.5%, down from 2.6%. Core inflation, which excludes food and energy, rose by 0.2%, while remaining steady at an annual rate of 2.6%. This decline in inflation is seen as an end to a severe inflation period that peaked at 7% in 2022, and Fed Chair Jerome Powell has expressed confidence in returning inflation to the target level of 2%. As inflation decreases, there’s potential for the Fed to cut interest rates, which is expected to happen in the mid-September meeting, contingent on further data. The job market remains solid, but hiring has slowed, particularly in health care and government sectors. The economy grew at a robust annual rate of 2.8% in the last quarter, a sign consumers and businesses are still spending, although the costs of essentials remain high compared to three years ago. From a transportation perspective, lower interest rates could lead to increased investment in infrastructure and public transportation. Cheaper financing may encourage more projects aimed at improving connectivity and sustainability, which can be beneficial for urban development and economic growth. However, challenges like inflation in material costs for construction and ongoing supply chain issues could temper these benefits. The transportation sector must remain adaptable to these changing economic conditions to ensure efficient service and development.