It is hard to admit that we are rooting for poorer economic conditions. Less job growth, lower consumer confidence, slower service sector growth, retail sales and more. But if you are a fan of lower interest rates, that is exactly what we need to see in order to bring inflation down to the point that the Federal Reserve is open to lowering short-term rates. In fact, we have seen economic reports in the past weeks providing some evidence of such a slowdown.

Last week we saw the monthly numbers for inflation as well. The Consumer Price Index (CPI) came in slightly below forecasts and the Producer Price Index (PPI)  readings that were a bit higher than expected–altogether mixed, but better than most expected. Speaking of inflation, remember that higher interest rates increase the cost of housing, both renting and owning. Therefore, lower rates could accelerate our progress against inflation, and this could give the Fed even more leeway.

The Fed will be meeting again in mid-June and again at the end of July. Could additional reports indicating that the economy is slowing push them to end their “higher for longer” policy? It is too early to tell. A few reports do not constitute a trend. But we could very well see a trend before these meetings take place. Of course, with these slower economic reports, the markets could continue to react before the Fed decides to make their move. We have already seen a reaction which has caused rates to retract somewhat from 2024 highs. Let’s hope for more.