Your Evening Briefing: Key Fed-Favored Measure Shows Cooling Inflation

The US Federal Reserve’s preferred inflation measures eased in December to the slowest annual pace in over a year while consumer spending fell, helping pave the way for policymakers to further scale back interest-rate hikes. The figures added to mounting evidence that the worst bout of inflation in a generation has passed as the Fed’s aggressive tightening campaign works its way through the economy. Officials are widely expected to once again slow the pace of rate hikes, to a quarter point next week, and will discuss how much higher they need to go to ensure prices are cooling for good.

But as always, there’s bad news, too. Another key gauge of the health of the American economy is showing stress. There’s a growing cohort of Americans facing auto repossessions, often an ominous sign. During the pandemic, a surge in used car prices forced buyers to take out bigger loans for their vehicles. The monthly payments may have been more manageable amid lockdown bailout checks, a tight labor market and surging stocks. But that’s changing for many people as inflation, though cooling, eats into their budgets.