Skip to main content

October Inflation Was Lower Than Expected; CU Economists Take a Closer Look

Credit union economists see signs that the Fed might start easing rate hikes.

Economic uncertainty - Businessman without head, and question ma Source: AdobeStock.

October’s inflation came in lower than expected, leading credit union economists to predict the Fed might have a reason to begin making smaller interest rate hikes.

The U.S. Bureau of Labor Statistics reported Thursday that the consumer price index rose 0.4% from September to October after seasonal adjustments, the same monthly increase that occurred in September. Prices in October were 7.7% higher than a year earlier, down from the annual inflation rate of 8.2% in September.

“This is the lowest increase for the year as prices for used cars, air travel and medical care declined in October,” CUNA Senior Economist Dawit Kebede said. “Overall, the October inflation report shows signs of prices slowing down.”

Dawit Kebede Dawit Kebede

Kebede predicted the annual inflation rate would fall to 7.5% by December — well above the Fed’s 2% target, but moving in the right direction.

On Nov. 2 the Federal Open Market Committee raised rates by 75 basis points — its fourth 75 bps increase in a row. Fed Chair Jerome Powell said then that rates will rise further, but the size of the increases might lessen as early as its next meeting Dec. 13-14, or perhaps the following one on Jan. 30-31, 2023.

The Fed’s rapid escalation in rates has increased borrowing costs for consumers, raised net interest margins for credit unions and lowered the value of their investments.

NAFCU Chief Economist Curt Long said October’s 0.4% inflation rate was “lower than expected and is hopefully an indication that the economy is cooling off.”

Curt Long Curt Long

“The report supports the step down to a 50-basis point hike in December that the FOMC foreshadowed last week, and another report or two similar to this one would present the fodder for an outright halt to rate increases,” Long said.

Kebede also said a 50 bps hike was likely next month.

Kebede said core inflation, excluding food and energy, also slowed down from 0.6% in September to 0.3%.

Both economists noted the out-sized role of housing in October’s inflation, but noted signs that price rises might start to ease even there.

Long said that although October’s 0.8% housing inflation was the highest monthly growth rate in over 30 years, it was spurred by a large increase in hotel prices. Housing rental costs decelerated during the month and are likely to begin a precipitous decline over the coming months as new lease costs decline.

Kebede said housing accounted for more than half of the 0.4% increase in overall monthly prices.

“There is a lag of up to 18 months between current market price and the CPI for housing. The CPI reflects increases from a few months ago but current market price for housing is cooling down,” Kebede said.

Long said used car prices fell at an accelerated rate and for the fourth consecutive month. While new car prices advanced in October, the rate of increase slowed as production improved.

Comments

Popular posts from this blog

Guardians Credit Union Moves Management Of Its ATM Fleet To Dolphin Debit

WEST PALM BEACH, Fla.—The $306-million  Guardians Credit Union  has turned management of its ATM fleet over to  Dolphin Debit . Minire Syla The credit union has four ATMs at branches and 10 at various select employee group sites. The decision was a big move for Guardians, which had always managed its own ATM fleet, the CU stated. “Dolphin stood out because of their experience, reliability, and the fact that they could truly take the burden off our staff,” said Chief Financial Officer Minire Syla. “Their ability to manage everything seamlessly, combined with the marketing opportunities on ATM screens, made them the best choice for us.” The credit union said it had a number of key priorities for the move, and Syla explained that while reducing the burden on staff, compliance, and cost savings were all important, what was paramount was providing “the best possible experience for our members.” “The convenience and reliability of our ATMs are crucial and outsourcing to Dolphin...

Lucky 7s: CU SoCal Intro’s 7% Share Certificate With 7-Month Term

ANAHEIM HILLS, Calif.–Credit Union of Southern California (CU SoCal) has introduced a 7% APY share certificate with a seven-month term. “Designed to help members grow their savings, this high-yield certificate offers a strong return on a manageable deposit—capped at $7,000,” the credit union said. “Available from April 3 through May 31, it’s an ideal option for those looking to make the most of their money, even with a smaller investment.” There is a $1,000 minimum opening deposit, a limit of one per member, and new money is required.  ‘Excellent Opportunity’ “We designed this certificate to help more members benefit from a great rate without the need to lock up a large sum of money,” COO Suzie Kisslan said in a statement.. “This is an excellent opportunity for savers to make their money work harder in a short period of time.” The $2.89-billion CU SoCal has approximately 155,000 members. 

Unlocking the Power of AI:

 

Celebrating 40 Years Of Credit Union Impact

From shaping the industry’s approach to data to framing the conversation around key industry issues, here’s a look at the impact we’ve made — and what’s to come Aaron Passman Let’s take a trip back in time. It’s Monday, April 1, 1985. You’re headed home from work at the credit union, one of more than 10,000 nationwide. You’re sitting behind the wheel of a Chevy Cavalier — the top-selling car in America at the time — with “We Are The World” piping out of the speakers. Not surprising, as it’s the No. 1 song in the country. You’ve got to make a stop at the grocery store, where the price of eggs has dropped to about 50 cents a dozen — roughly 20 cents cheaper than one month prior — but you’re already starting to think ahead to the weekend. Maybe you’ll head to the theater for “Police Academy 2,” and see what all the fuss is about — after all, it’s the most popular movie in America. But tonight you’re planning to sit down for the NCAA championship game to see whether Villanova can pull off ...

Jim Nussle To Retire From America’s Credit Unions

  WASHINGTON—America’s Credit Unions President and CEO Jim Nussle plans to retire from the trade association, ACU announced. ACU said Nussle did not specify an exact date for his retirement but rather expressed his desire to provide the ACU board the “full flexibility” to conduct a search for a CEO over the next several months on a timeline of their choosing, and to ensure his ongoing efforts to champion the organization’s advocacy agenda.   Jim Nussle “Serving credit unions is a deep personal privilege. After a long career in advocacy from both sides of the policy making table, leading CUNA and the honor of helping to create and lead America’s Credit Unions, it is soon time for me to pursue new interests in retirement. My announcement today is intended to provide the board the time to conduct a thorough national search to find the next leader for the Association,” Nussle said.  “My full and ongoing focus will be on our intensive credit union advocacy efforts to prot...