Inflation Pain

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BY SUZANNE HAZLETT, MBA, CIMA®, CFP®

Suzanne Hazlett, MBA, CIMA®, CFP®, founder of HAZLETT WEALTH MANAGEMENT, is a Certified Investment Management Analyst® and CERTIFIED FINANCIAL PLANNERTM professional.

Inflation is an increase in the overall price level of goods and services across the economy. “Historically, inflation has been driven by strong demand growth and widespread supply constraints,” explains Blackrock’s Chief Investment Officer of Global Fixed Income, Rick Rieder. Over time, inflation reduces the purchasing power of your savings. Modest inflation is healthy for an economy. If left unchecked, inflation can get out of hand.

As inflation remains sticky and the U.S. economy continues to demonstrate resilience, the Federal Reserve’s updated projections show two rate cuts next year, a revision down from the four projected in September. In its Summary of Economic Projections, the Fed indicated two anticipated reductions in 2026 and one in 2027.

Key Takeaways from the Fed’s December Open Market Committee Meeting:

  • Inflation remains elevated at 2.4% compared to the 2.0% target
  • The slower pace of interest rate cuts next year reflects both the higher inflation we have had this year as well as higher inflation for next year compared to before
  • We are on track to get to 2.0%, though it may take one or two years more than we had expected
  • The economy and policy are in a good place today
  • The Fed is not on a pre-set path, and it will depend on incoming data
  • Consumer spending has remained resilient
  • Housing market has remained weak
  • Labor market remains solid
  • Unemployment rate remains low even as it has increased during the last year
  • Labor market is not a primary reason for higher inflation

While there are many reasons to anticipate a favorable investment and economic environment in the New Year, long-term investors recognize the path is often not smooth. The next FOMC meeting takes place January 28-29, 2025.

Suzanne Hazlett, MBA, CIMA®, CFP®, is a Certified Investment Management Analyst® and CERTIFIED FINANCIAL PLANNERTM professional. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities are offered through Raymond James Financial Services, Inc., member FINRA/SIPC. HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. 675 Sun Valley Road, Suite J1 + J2, Ketchum, Idaho, 83340 208.726.0605 HazlettWealthManagement.com