by InteractiveAdvisors
by InteractiveAdvisors
Outlook

Inflation has been reduced in half from last year

by |Published

By: Sreeni Meka, Lakeland Wealth Management

The Consumer Price Index climbed 4 percent in the year through May, well below the recent peak of 9.1% last June and down from April’s 4.9% increase.

However, core consumer prices, which exclude volatile food and energy categories, climbed 5.3% in May from last year, down from 5.5% in April.

The index for shelter was the most significant contributor to the monthly all-items increase, followed by an increase in the index for used cars and trucks and the energy index, which declined 3.6 percent in May.

On an annual basis, Transportation services increased by 10.2%, followed by an increase in the shelter by 8%, and Energy, on the other hand, dropped by 11.7%.

Since last year, the Fed has aggressively raised rates from low levels to slow economic growth and tame Inflation. Fed officials in May raised the benchmark interest rate to the current range between 5% and 5.25%, the highest level in 16 years. 

During the Covid, policymakers overreacted and doled out free PPP money to businesses without due diligence and free handout to many needed. Every policy mistake has consequences. Overspending and expansionary fiscal policies spurred the hyperInflation. 

Now the Federal Reserve is taking the blame for the mistakes of the irresponsible policymakers. Initially, the Fed reacted slowly and anchored to the transitory inflation theme. However, the Fed was quick enough to raise the rates above 5 percent and have a hawkish approach to growing Inflation.  

Given the 5 percent inflation, we are at the cross-section, but we shouldn’t conclude that rates are at equilibrium. The Fed needs to stay aggressive on rate hikes and put excess weight on top of Inflation for a prolonged time; that is the only way we can suppress Inflation to reach Fed targeted two percent inflation target.

PHOTO CREDIT: https://www.shutterstock.com/g/rozbyshaka

Via SHUTTERSTOCK

DISCLOSURE

Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss. 

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be individual or personalized investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation

AUTHOR

Lakeland Wealth Management
Lakeland Wealth Management
Lakeland Wealth Management LLC is fee-based registered investment advisory firm based in Lakeland, TN offering money management and financial planning services to families, institutions and high net worth individuals. Lakeland Wealth Management adopts fundamental value analysis and tailors the portfolios to fit individual needs, risks and time horizons. Sreeni Meka,CFA is the managing member and investment advisor at Lakeland Wealth Management LLC. Sreeni has twenty-eight years of investment experience in the equities and derivatives markets. Sreeni has worked as a management consultant for big four firms and served at a number of Fortune 500 companies in North America. Sreeni holds a Masters degree in Mechanical Engineering from The University of Texas at El Paso, an MBA degree in Finance from University of Memphis and He is a Certified Financial Planner™ and a CFA charter holder.

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