Inflation cooling, report shows, as Federal Reserve prepares to meet next week

RALEIGH, N.C. (WTVD) -- The CPI report for August showed inflation slowed to 2.5% year-over-year, a key metric as the Federal Reserve prepares to meet next week.

With it still above the Federal Reserve's goal of 2%, economists anticipate an interest rate cut will be implemented.

"A pause in the right direction. Clearly, it will affect car loans, home loans will go down, but go down marginally," said Dr. Christian Koch, a Professor of Finance at NC State.

Koch predicted a drop of 25 basis points.

"You don't really want to have changes in Fed policy before an election. This is kind of unique that we're actually getting a potential cut next week. I would say 25 basis points and I think 50 (basis points) would kind of freak out the market and it would go against kind of the unwritten rule that the Fed doesn't want to be seen as political," Koch said.

It's a metric closely being tracked by those in the housing market. Doorify MLS reports across the 18-county area in and around the Triangle, the median sales price is flat year-over-year. Further, closed sales are down 10.4%, and the median amount of time properties are staying on the market is 20 days, six days longer year-over-year.

"For folks who are currently in homes, they've got these two-and-a-half, three-and-a-half percent mortgages. And it's hard to break away from that, to walk away from that into something in the sevens or sixes even," said Frank DeRonja, Principal Broker with Corcoran DeRonja Real Estate in Raleigh.

According to the Federal Reserve, the average 30-year fixed rate mortgage is at 6.2%, the lowest its been since February 2023. While acknowledging everybody's situation is different, DeRonja believes a rate dropping below six percent could spur action.

"We've seen a lot of activity this year, just folks just saying, 'Hey, we're ready to pull the trigger no matter what.' (There's) still a lot of people waiting on the sidelines though," said DeRonja.

While the inflation rate continues to trend downward, and some sectors, including energy, have seen price decreases, baked-in pricing jumps from previous years are continuing to be felt.

"We've noticed that people are a little bit more price-conscious. People are coming out and less likely to have that second or third beer, which we understand," said Chris Powers, co-owner of Trophy Brewing.

The popular brewery has five locations, with plans to open two more. After navigating the challenges of the pandemic, Powers notes a sense of normality heading into the final quarter of the year.

"We've seen a slower increase in prices on certain things. I think a lot of that stabilized. A lot of the things like our cured meats, our protein and things like that have really stabilized in pricing. On the brewery side, we've actually seen some price decreases. Some of our bright cans have gone down in price, which has been good," said Powers.

The question all businesses are now facing is: how will consumers react? Record-breaking travel for Labor Day could be a sign that people are more comfortable using discretionary income.

"I definitely feel more confident now than I did a year ago," said Powers.