Share“Consumer price inflation notched up to 2.6% in October from a year ago. Though an acceleration from 2.4% in September, the overall trend is towards stabilizing prices and away from the shock of the 10% killer inflation seen two years ago. The falling energy price was not enough to offset the 4.9% rise in housing rent, which is the biggest weight in the measurement. Economists are debating whether housing rent is that strong, considering the huge number of newly completed empty apartment units hitting the market, especially in the southern states. Irrespective, the overall inflation rate is normalizing, and the Federal Reserve can move away from its current restrictive monetary policy, which means further cuts to the short-term interest rate in upcoming months.
The Fed does not directly control mortgage rates. However, they can decrease if more homes are available in the market, more workers enter the labor force, and energy prices decline further. Tariffs can be inflationary in the short term, and budget deficits can push mortgage rates up. Given that tax increases appear unlikely under President Trump, meaningful cuts in government spending are required to control the deficit. Let’s see what Elon Musk can do in the newly created role.”
