Local Economist Breaks Down Lowering Inflation Rate, Possible Interest Rate Cut

The U.S. Labor Department released a report showing inflation at its lowest rate in over three years, yet people are still feeling the strain of high prices.

Economists say the downward trend signals that some good changes are ahead. “It’s positive in that it’s coming down. You know, we don’t want inflation at eight or 9 or 10%. I mean that’s absurd,” Steve Agee, a professor of economics at Oklahoma City University, said.

Inflation fell to 2.9% in July, the first time it had dipped below 3% in over three years, according to the U.S. Labor Department.

That percentage is down from a 40-year high in 2021 of 9%. “Prices are still higher than what they should be, but they are coming down,” Agee said.

He says there's more to the story for everyday Oklahomans than just one number.

“The Consumer Price Index is a bundle of goods and services that they look at and within that bundle, some of the prices are still probably pretty high relatively speaking,” Agee said.

Prices like groceries, car insurance, rent and utilities, to name a few.

But Agee says the downward trend signals that more relief could come.

“So, the next question is well what’s the Federal Reserve going to do in terms of interest rates?” he said.

Lowering inflation raises his confidence that the Federal Reserve will lower interest rates when they meet in September.

“It takes time, though. You know, the monetary policy usually takes 12 to 18 months before it kicks in,” he said. “Try to be patient. Inflation is still around. We’re still there. Be careful about how you spend your money.”

Interest rates rose to their highest point in over 20 years as the Federal Reserve worked to tame inflation, so Agee says he’s confident that a cut to those rates should benefit consumers in the long run.

The Federal Reserve will vote to make a change in interest rates at their September meeting.