West Michigan's Morning News
Inflation Report with Jill on Money
We'll get the very latest following that weekend shooting being investigated as an assassination attempt at 715, then another CBS News Special Report at 720 this morning, CBS News Business Analyst and host Jill on money, Jill Schlesinger, unrelatedly on the live line. Thanks for doing this again today. Of course I can hear you. I just have to unmute myself, which always does help quite a bit. We got some CPI numbers on Friday, but I guess we need to take a little step back and talk about just what CPI is and what it's referring to. So, you know, when we think about inflation, right, we are talking about the rate of increase of prices. We always have a little inflation in a growing economy, okay? That's why your wages are going up and, you know, we just see growth overall, okay? That's sort of the good news that we always get it. And let's say about a 2% annualized pace. The prices usually go up by about 2% from the previous year, at least in the decade, leading up to the pandemic, okay? So, 2%, that's what the Fed likes, that's kind of what we had all well and good. And then the pandemic hits and we're cooped up and we're freaked out, and then finally things open up and we've got money from the stimulus. We also know that we just really want to spend, so we call that animal spirits we spend, right? And unfortunately, there's also the supply chain messes, so prices start to go up. And so, instead of having a 2% inflation rate, we peak, it goes up to over 9% year over year. So, back in 2022, prices were 9% higher than they were than the previous year. So, when we talk about the inflation rate coming down, we're not at 9% anymore, we're down to 3%, that's good, but prices are still high. And that's the big confusion, I think, that I hear about from folks. They'll call me and they'll be like, you keep saying there's good news on inflation, but prices are still high, and the answer is yes and yes. The inflation rate is coming down and because inflation was so high, so quickly, prices are still high. And I don't think that prices are going to go down so much as it's more likely that our wages sort of catch up, that if prices just were stagnant for another year, then our wages would catch up and we'd get to when we would get more use to these high prices. So, talk to us about that correlation then between that number and when the Fed might do something about interest rates. Well, I just told you that the Fed really wants inflation down at a 2% annual increase and we're at 3%. So, the question is, when will they start to cut interest rates? Because the main mechanism that they have to try to fight off inflation is to increase interest rates, which often will slow down the economy and then we slow our spending and then we start to see the inflation rate come down. So, the interest rates have been at 23 year highs now for a year, so long time, right? And the way that the Fed will start feeling like they can actually cut rates is to see the inflation report not just on the last couple of months, but maybe for another couple of months, if they keep seeing good progress, then I think maybe September could be the time where they start to lower interest rates. And again, that would be huge if you're a borrower. It doesn't mean you're, okay, just to be clear, when you hear this, it doesn't mean that, oh my God, mortgage rates are going to be 3% again, that's not happening, okay? Not happening, but it does mean that we're starting the process of moving in the right direction. Well, let me ask you something, Steve, what was the first mortgage interest rate that you had when you bought your first home? Well, we bought for a closure house and we got this amazing rate at like 9%, it was in the 90s, so it was huge. Okay, right. And so 9% mortgage rate was like the first rate that you had and then interest rates came down, came down, came down. And for a lot of people who are buying homes right now, that's exactly what they're betting on. They're saying I'll pay a high interest rate right now, but I got a refinance over the next, you know, between now and 30 years or now in 10 years. And I think you'll have the opportunity to do that. Again, I just don't think that we're going to go back to this era where we have 3% mortgage interest rates. That was a real outlier for history. And so if you got a mortgage interest rate of 3% lucky for you, but I don't think you should have an expectation of that going forward. CBS News business analyst, host of Jill on Money, Jill Schlesinger. Thank you. Great to talk to you.