The Consumer Price Index (CPI) measures price changes in a basket of goods and is vital for gauging inflation trends. Inflation affects not only the Federal Reserve's monetary policy but also the social security checks for seniors, linking cost of living adjustments to CPI data. Sustained inflation above 2% could prolong high interest rates, hindering economic growth. Conversely, decreasing inflation may lead to economic expansion, positively impacting retirement funds. Potential changes in social security cost of living adjustments (COLA) suggest adjustments may not reach the high rates seen in 2022/2023 soon.
If inflation stays elevated above the Fed's 2% target for too long, interest rates could remain higher for longer, slowing overall economic growth in the U.S.
If inflation continues to come down and rates follow, we could be due for another boom ahead, which would be beneficial for retirees and their portfolios.
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