They say this is good economic news. It might not feel like it

A model of this story seems in CNN’s What Issues e-newsletter. To get it in your inbox, enroll right here.

Earlier in December, CNN’s Christine Romans wrote in regards to the “sure, however” financial system.

“Sure, the financial system is robust,” she stated. “But it surely comes with a whole lot of caveats.”

Right here’s a riff on that for this week: There’s some excellent news to report, however questions and caveats are looming sooner or later.

Nicely, possibly it’s extra correct to say inflation’s not boiling fairly as a lot. CNN’s Alicia Wallace wrote Tuesday that the Shopper Value Index confirmed inflation slowing greater than many economists anticipated.

“Costs rose 7.1% yearly in November, down from 7.7% in October, based on the Bureau of Labor Statistics’ carefully watched index, which measures the change in costs paid by customers for items and companies,” she wrote.

Meaning inflation has been slowing for 5 straight months and is down from this yr’s peak of 9.1% in June.

Vitality costs particularly are down. It’s cheaper to purchase fuel in the present day than it was a yr in the past.

The Federal Reserve introduced it will hike rates of interest one other half of a share level on Wednesday and that it will not take into account inflation to be tamed till it falls to a sustained 2% in a special index, the Private Consumption Expenditures.

Meaning the Fed remains to be rooting for considerably larger unemployment charges and slowing the financial system.

Shares, which had risen on the “inflation is cooling” information Tuesday, had been down Wednesday on the “Fed will not be satisfied” improvement.

Federal Reserve Chair Jerome Powell made clear Wednesday that extra rate of interest hikes are on the way in which in 2023.

“We nonetheless have some methods to go,” he stated.

And he additional predicted there could be no fee cuts in 2023.

“Historic expertise cautions strongly towards prematurely loosening coverage. I wouldn’t say we’re contemplating fee cuts.”

Learn CNN’s updates in regards to the Fed information from all through the day.

The Fed made clear that fee hikes are working to sluggish the financial system – greater than it anticipated.

“After elevating charges to the very best stage in 15 years, the Fed stated Wednesday it forecast US gross home product, the broadest measure of America’s financial system, to develop simply half a share level in 2023,” writes CNN’s David Goldman.

“In its earlier forecast in September, Fed economists thought the financial system would broaden by 1.2%. Joblessness will develop subsequent yr too, Fed officers forecast, with the unemployment fee rising to 4.6% by the top of 2023, up from the present fee of three.7%.”

Goldman notes that the Fed argues an financial slowdown brought on by its fee hikes isn’t technically a recession.

“The semantics of whether or not or not America is in a technical recession or not could not matter – particularly to individuals who lose their job or firms whose earnings are squeezed,” he writes.

The Fed might be cautious as a result of they so badly underestimated inflation earlier this yr, based on Diane Swonk, chief economist at KPMG.

“They’re actually cognizant they’ve been humbled greater than as soon as by inflation reaccelerating for longer than they thought,” she stated on CNN simply earlier than Wednesday’s fee hike was introduced. “They don’t wish to permit the underlying inflation to metastasize.”

Information that negotiators on the Hill have reached the framework of an settlement to fund the federal government for a full yr is welcomed since it’s going to delay a brewing battle over spending.

There’s nonetheless lots to find out about this framework of a deal, together with what’s inside.

CNN’s Lauren Fox writes that even Home Republicans may be pleased about this improvement. GOP chief Kevin McCarthy is looking for the votes to change into speaker, and including a spending battle to his plate would get messy shortly.

“Republicans – even leaders corresponding to McCarthy – knew that clearing the deck now would make the primary months of their Home majority far simpler to cope with,” Fox writes. “Democrats needed to behave now whereas that they had management of the Home, Senate and White Home they usually had most energy over negotiations.” Learn extra of Fox’s report.

Not one of the disagreements over spending are going away. McCarthy should take a hard-line stance to placate conservative Republicans, and there’s an expectation that the GOP will use the debt ceiling, and the specter of a US authorities default, to pressure Democrats to comply with spending cuts subsequent yr.

Sooner or later, perceptions of a nasty financial system can change into actuality. If and when the debt battle begins to shake confidence within the credit score of the US authorities, that’s the form of factor that may reverberate into the financial system.

The distinction between 7.1% month-over-month inflation and seven.7% inflation in October could not really feel like a lot on the micro stage to People who’re paying 49% extra for eggs this yr than they had been final yr.

RELATED: What rising rates of interest imply for you

Inflation was an important concern of the latest election. Extra voters – 31% – stated inflation was an important concern to their vote than some other, based on exit polls. It’s due to inflation that Republicans will management the Home come January 3.

CNN’s Julia Horowitz writes Wednesday that the Fed’s mantra of looking for 2% inflation may be unattainable in an financial system the place provide chain points persist, the employee inhabitants is growing older and local weather change is a wild card.

“The last decade after the monetary disaster, they had been combating exhausting to get inflation up,” Mark Zandi, chief economist of Moody’s Analytics, says in her story. “Within the coming decade, they’re going to be combating exhausting to get inflation down.”

Within the meantime, cooling inflation may be praised by policymakers, but it surely may rub everybody else the incorrect method, particularly if an financial slowdown begins to really feel like a recession. That’s the form of notion that may proceed to maneuver elections.