The latest inflation report from the U.S Bureau of Labor Statistics shows a 0.4% monthly increase, in line with expectations but above the 3.1% consensus of economists polled by Dow Jones for the annual gain of 3.2%. With energy and housing costs making up more than half of this increase, it raises concerns about when rate reductions will begin and how many we can expect this year.
According to reports from Wall Street Journal and CNBC, these higher inflation levels may lead to the Federal Reserve holding off on any further increases in interest rates at their upcoming two-day meeting next week. While there is no immediate need for rate hikes, questions remain about when they will start reducing rates as inflation remains above their target goal of 2%.
Navy Federal Credit Union’s corporate economist Robert Frick believes that shelter costs are largely responsible for this rise in inflation and that they are not expected to decrease anytime soon due to rising home prices and slow declines in rent prices.
Former Boston Fed leader Eric Rosengren does not believe that Tuesday’s report will significantly change expectations for three rate cuts throughout this year despite showing a gradual improvement in core inflation levels. He told WSJ that as long as wages continue to decline slightly, he sees no reason why there would be a reduction before June.
This recent development suggests that following February’s higher-than-expected inflation report, it is likely that Connect CRE may hold off on implementing any rate cuts.
