The global economy is showing signs of recovery, with growth increasing by 2.6% and inflation reaching a three-year low. This progress is bringing us closer to the desired “soft landing” that economists have been aiming for since the end of the COVID-19 shutdown. The strength of the US economy has played a significant role in this positive trend.
In May, despite concerns about high prices in the US, inflation actually fell by 3.3%, causing traders in the futures market to increase their bets on a rate cut in September to 84%. President Joe Biden has welcomed this news as it could boost his chances of winning reelection in 2024.
While there is potential for interest rates to start falling in September, central bankers are cautious about the risk of further inflation and are unlikely to quickly reverse the rate hikes of the past two years. The rising costs of essential items such as housing, healthcare, childcare, and higher education have been steadily increasing, creating an affordability crisis and contributing to voter pessimism about the economy.
The ongoing challenge posed by these rising costs highlights a complex problem for the US economy. While there may be some relief from lower interest rates and potentially even lower inflation in September, addressing these underlying issues will require sustained effort from policymakers and businesses alike.
