The producer price index fell 0.5% in July, per the Labor Department, but prices are still up 9.8% year-over-year. Gas prices have dropped, which have offset gains in housing costs, but inflation is still at near 40-year highs, and future rate hikes by the Fed are expected.
As of this week, the federal prime rate is 5.5%, higher than it has been in years. Internationally, we are doing well by comparison. The U.S. dollar is up more than 10% in 2022 compared to other top currencies. That is great news for American travelers, but with most international businesses and governments paying in in U.S. dollars, their bottom lines are severely impacted. Some countries with vulnerable economies, such as Sri Lanka, are facing complete financial collapse. Considering Argentina’s interest rates are at 69.5% amidst 71% inflation, our Fed’s incremental rate adjustments seem measured rather than reactionary, which has helped stabilize our major trading indexes.