The latest inflation data is sure to be a key indicator of consumer strength amid the highest interest rates seen in two decades. With the uncertainty of Brexit and the global economy in the balance, the new numbers could be a deciding factor in how consumers react to changes around interest rates.
The latest set of inflation data is expected to be released this week and could reveal how consumers are managing price increases despite the high interest rates. The consumer price index, which measures changes in the costs of everyday items, is expected to show how households are responding to rising prices. Any signs of inflationary pressure could be a signal of higher consumer spending, which is seen as a positive indicator for the economy.
The inflation data may also be used to determine whether the Federal Reserve should raise or lower interest rates. If inflation is high, then it is likely that rates could be adjusted to prevent a holiday season budget squeeze. At the same time, consumer spending could be bolstered as shoppers are inspired to buy more at lower prices.
It’s no surprise that consumers are feeling the squeeze of higher interest rates. Analysts have pinpointed the current rate increases as one of the main causes of financial difficulty for families, particularly those living on a tight budget. As consumers try to pay off their debts while still attempting to make new purchases, the outlook can be daunting.
The release of the inflation data may help alleviate some of these worries by providing an accurate measure of how drastically prices are rising. If inflation is well below the annual target of two percent, then households can have greater faith that their finances won’t be hit too badly in the aftermath of the higher rates. Equally, if the data reveals that inflation is increasing, then households can bear this in mind when deciding how best to manage their finances.
Regardless of the results, the latest inflation figures could greatly influence consumer confidence. With the cost of living changing day to day, it is vital that the Federal Reserve is able to make accurate estimations surrounding the impacts of changing rates. The new data published this week should be an integral part of the decision-making process.