CPI inflation hit 4.2% year-over-year in May — a three-year high — driven by shelter, food, and energy costs. The good news: the Fed has already cut rates to 3.63% from the 5.25% peak, so borrowing is meaningfully cheaper than a year ago. The tension: rising inflation could force the Fed to pause or reverse cuts, which would push rates back up. Unemployment is at 4.3% — still low historically, but softening. For small business owners: lock in fixed-rate financing now while rates are down, watch your input costs closely, and price for the next 6 months of inflation — not the last 6.