{"id":12437,"date":"2023-05-15T13:38:50","date_gmt":"2023-05-15T13:38:50","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=12437"},"modified":"2023-05-15T13:39:33","modified_gmt":"2023-05-15T13:39:33","slug":"inflation-ticks-lower-keeping-an-eye-on-lending-standards-and-debt-ceiling-update","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/inflation-ticks-lower-keeping-an-eye-on-lending-standards-and-debt-ceiling-update\/","title":{"rendered":"Inflation Ticks Lower, Keeping an Eye on Lending Standards, and Debt Ceiling Update"},"content":{"rendered":"\n<p>In this week\u2019s Steady Investor, we look at some of the current events that are shifting the market, such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Inflation status<\/li>\n\n\n\n<li>Regional banking crisis update<\/li>\n\n\n\n<li>Still no deal on the debt ceiling<\/li>\n<\/ul>\n\n\n\n<p><strong>Inflation Ticks Lower in April, But Not Convincingly \u2013 <\/strong>The Bureau of Labor Statistics reported this week that the consumer price index\u2019s (CPI) measure of inflation rose by 4.9% year-over-year in April. This inflation print marks a slight decline from March\u2019s 5% reading but remains a solid improvement from the 9.1% peak reached in June 2022. Core prices, which strip out food and energy, rose 5.5% y-o-y in April, a slight improvement from March\u2019s 5.6% increase. Higher core prices are largely a byproduct of pressure in services prices\u2014and specifically, the shelter component, which makes up one-third of the index. The upshot here is that shelter prices measure what renters and homeowners are paying for new <em>and<\/em> existing leases, which means meaningful declines in rents will not show up immediately in the CPI number. Given that median rents in the U.S. have been falling, the shelter component should contribute significantly less to the CPI number by this summer and fall. Excluding shelter, food, and energy prices \u2013 the so-termed \u201csupercore\u201d inflation reading \u2013 prices were up 3.7% year-over-year in April. This latest inflation report supports the view that the Fed could pause rate increases at their next meeting. Even though inflation remains high, Fed officials have shifted to looking for signs that economic growth and inflation are stronger and higher than expected, neither condition of which is overtly apparent today. The labor market remains tight, but downward trending inflation and negative corporate earnings growth suggest the economy is not running too hot. According to the CME group, the market sees a 14% chance the Fed would hike another 25 basis points at the next meeting.<sup>1<\/sup><\/p>\n\n\n\n<p><a href=\"https:\/\/go.steadyinvestor.com\/looking-to-retire?source=zim&amp;medium=blog&amp;term=steadyinvestor_retire_soon_zim_05_15_2023&amp;content=retire_soon\"><strong><u>Retiring Soon? Here\u2019s What You Need to Know!<\/u><\/strong><br><\/a>&nbsp;<br>As uncertainty rises surrounding the future of the market, we understand how difficult it can be to make future financial decisions \u2013 especially for those who are trying to build their retirement portfolio.<\/p>\n\n\n\n<p>We are offering readers our free guide that provides a step-by-step blueprint to help you build a sound retirement portfolio. This guide offers you a checklist of the most important financial, tax, and investment considerations for retirees, with detailed explanations to help you prepare for this new stage in your life.<\/p>\n\n\n\n<p>If you have $500,000 or more to invest, get our free guide today!&nbsp;<br><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/looking-to-retire?source=zim&amp;medium=blog&amp;term=steadyinvestor_retire_soon_zim_05_15_2023&amp;content=retire_soon\">Download Zacks Guide, <em>Looking to Retire Soon<sup>2<\/sup><\/em><\/a><\/u><\/strong><\/p>\n\n\n\n<p><strong>Keeping a Watchful Eye on Lending Standards \u2013 <\/strong>The regional bank \u2018crisis\u2019 has tapered off since the fall of First Republic Bank, but the legacy of bank stress in 2023 may be one of tighter lending and credit standards. These factors will be key to watch throughout the year. If banks decide that a dollar in reserves is better than a dollar lent to consumers or businesses, it could choke off a key source of capital and credit that would otherwise fuel growth. The Federal Reserve publishes weekly loan activity for small and large banks, which will be important to watch. But the Federal Reserve Bank of St. Louis also conducts a Senior Loan Officer Opinion Survey, which polls lending officers at major banks on credit and loan standards. So far, the polls suggest that many major banks are indeed tightening standards, as seen in the chart below. The chart looks at the net percentage of banks tightening standards for loans to small-, mid-, and large-size businesses, auto loans, and credit cards. Standards are tightening across the board, which is likely to impact economic growth in the second half of the year.<sup>3<\/sup><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"350\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-5-1024x350.png\" alt=\"\" class=\"wp-image-12438\" srcset=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-5-1024x350.png 1024w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-5-300x102.png 300w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-5-768x262.png 768w, https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2023\/05\/pic1-5.png 1318w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<sup>4<\/sup><\/em><\/strong><\/p>\n\n\n\n<p><strong>Still No Deal on the Debt Ceiling \u2013 <\/strong>Congressional leaders met with President Biden this week to discuss what it would take to raise the debt ceiling. So far, no progress on a deal has been reported. The two sides have agreed to meet again, however, which may factor as a positive sign. Debt ceiling standoffs have become more common in the last decade or so, the drama of which sometimes pushes up to the \u201cX date\u201d when the U.S. would need to start delaying payments on some obligations. It is unclear which payments would be missed first, but defaulting on debt \u2013 i.e., not making interest payments on bonds \u2013 would likely be last. Government wages, Social Security, Medicare, and other entitlement programs would likely see delays or \u201cIOUs\u201d happen first. For its part, the market does not seem to be too fazed by the posturing on the debt ceiling just yet. Stocks rose in April, and Treasuries were essentially flat \u2013 with both exhibiting relatively low volatility.<sup>5<\/sup><\/p>\n\n\n\n<p><strong>Planning to Retire Soon? <\/strong>\u2013 Retirement marks the end of one life stage, and the beginning of another. To guide you through this new phase, we recommend a thorough review of your financial situation.<\/p>\n\n\n\n<p>Our guide, <em><strong><a href=\"https:\/\/go.steadyinvestor.com\/looking-to-retire?source=zim&amp;medium=blog&amp;term=steadyinvestor_retire_soon_zim_05_15_2023&amp;content=retire_soon\">Looking to Retire Soon<sup>5<\/sup><\/a><\/strong><\/em> walks through four essential financial and investment topics for retirees, with detailed helpful information about:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The current and expected future costs of healthcare in retirement<\/li>\n\n\n\n<li>Strategies for retirement investment income in today\u2019s current low-rate environment<\/li>\n\n\n\n<li>The key tax rules that every retiree must know<\/li>\n\n\n\n<li>The most important way to protect your retirement assets from market volatility<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to understand your retirement options, get our guide today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this week market update, we take a look at some of the current events that are shifting the market<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-12437","post","type-post","status-publish","format-standard","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12437","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=12437"}],"version-history":[{"count":3,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12437\/revisions"}],"predecessor-version":[{"id":12441,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12437\/revisions\/12441"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12437"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12437"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12437"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}