July 18

7/18 - Inflation fears remain front & center. Consumer prices (CPI) increased at a 9.1% annual rate in June, a 41-year high. The Fed raised the federal funds rate by 3/4 of a percentage point on 6/15, and another 3/4-point increase is expected later this month. Two more half-point increases are likely after that, taking rates from roughly zero to 2.5% in 2022. High fuel & housing prices are squeezing consumer budgets, particularly at lower income levels. At the same time, stock market losses are flashing warning signs to upper income Americans. Consumers are dipping into savings, increasing the use of credit and/or forgoing some purchases & outings. Spending, which accounts for 2/3 of GDP growth, was up just 0.2% in May and, adjusted for inflation, declined by 0.4%. A sustained pullback in consumer spending would likely tip the economy into recession.