John’s Finance Corner: Fed Week! Anticipated Rate Cut and Its Implications
It is Fed Week! As a Senior Loan Officer, I can tell you that all eyes are on the Federal Reserve this week. The anticipation is high as the Fed is expected to cut the Fed Fund Rate for the first time since the COVID-19 pandemic. This potential rate cut is driven by the latest inflation readings and important data on future home price expectations.
Inflation Trends
The latest Consumer Price Index (CPI) report shows promising progress in consumer inflation. Prices rose by 2.5% in August, down from July’s 2.9%, marking the lowest CPI reading since February 2021. Core CPI, which excludes food and energy prices, increased by 0.3% in August, slightly above expectations, with the year-over-year reading holding steady at 3.2%. The primary contributors to current inflation levels are shelter costs and auto insurance, which together accounted for 89% of the inflation observed in August.
On the wholesale side, the Producer Price Index (PPI) rose by 0.2% in August, with the yearly reading dropping to 1.7%. Core PPI, excluding food and energy prices, rose by 0.3% in August, pushing the year-over-year number from 2.3% to 2.4%.
Housing Market Insights
CoreLogic’s Home Price Index revealed that home prices across the country were flat in July after several months of strong gains. However, overall prices were still 4.3% higher in July compared to the previous year. While the pace of price increases has slowed, they are expected to continue rising. Estimates from Fannie Mae and Pulsenomics suggest that home prices could increase by as much as 20% over the next five years.
Federal Reserve Meeting
The Federal Reserve’s two-day meeting will conclude on Wednesday, with expectations of a rate cut between a quarter to half a percent. While this cut should help lower mortgage interest rates, much of the potential cut has already been factored into the bond markets. Therefore, we may not see mortgage rates drop by the same amount as the Fed’s rate cut.
It will be crucial to pay attention to Fed Chairman Powell’s remarks for more clarity on the near-term outlook and whether the Fed plans additional cuts before the end of the year.
Stay tuned for more updates as we navigate these significant economic developments together.
Feel free to reach out if you have any questions or need further insights on how these changes might impact your mortgage rates and home buying decisions.
John Lamberg
Senior Loan Officer
Mobile 727.366.9947
Website ccm.com/john-lamberg
Email [email protected]
