that there could be a"good chance of an inflation surprise below the 3% handle in headline terms." Should inflation fall below 3% thanks to falling used-car prices, it would give a major boost to the Fed's efforts to bring down the pace of consumer-price increases to its 2% target.
That's because used car pricesUS inflation has more than halved since mid-2022 when it hit 40-year highs, with the latest reading coming in at 4.0% for the year through May. The drop has been largely engineered by the Fed's aggressive interest-rate policy, where it s hiked benchmark borrowing costs by 500 basis points over the past 16 months. that more rate increases are on the way, but investors are worried that too much monetary tightening will tip the economy into recession.