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Inflation ran hotter than expected in February as high prices persist
QI Research CEO and chief strategist Danielle DiMartino Booth reacts to the ‘Apollo’ article that argues the Federal Reserve will not cut rates in 2024.
Inflation unexpectedly ticked higher in February thanks to a jump in the cost of gasoline and rent, underscoring the challenge of taming price pressures within the economy.
The Labor Department said Tuesday that the consumer price index, a broad measure of the price of everyday goods including gasoline, groceries and rent, rose 0.4% in February from the previous month. Prices climbed 3.2% from the same time last year.
Both of those figures came in higher than the 0.3% monthly increase and 3.1% headline gain recorded in January.
WHY ARE GROCERIES STILL SO EXPENSIVE?
Other parts of the report also indicated that inflation has been slow to retreat. Core prices, which exclude the more volatile measurements of food and energy, climbed 0.4%, as it did in January. It rose 3.8% annually. Both of those figures are slightly higher than estimates.
Altogether, the report indicates that while inflation has fallen considerably from a peak of 9.1%, it remains above the Federal Reserve’s 2% target.
THE NUMBER OF HIGH-PAYING JOBS IS DWINDLING
High inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily affected by price fluctuations.
A customer shops at a grocery store on February 13, 2024 in Chicago, Illinois. (Photo by Scott Olson/Getty Images / Getty Images)
Housing and gasoline costs were the biggest drivers of inflation last month, accounting for more than 60% of the total monthly increase.
Rent costs rose 0.4% for the month and are up 5.8% from the same time last year. Rising rents are concerning because higher housing costs most directly and acutely affect household budgets.
Gasoline prices, meanwhile, surged 3.8% over the course of February. However, they remain down 3.9% when compared with the previous year.
Other price gains also proved persistent in January.
Food prices, a visceral reminder of inflation for many Americans, were unchanged over the course of the month. However, grocery prices are up 1% from the same time last year.
MORE AMERICANS ARE GETTING A SECOND JOB TO OFFSET STING OF HIGH INFLATION
The price of airline tickets and car insurance also jumped in February.
The price of gas is displayed on a sign at a Shell gas station in Washington, DC, on April 12, 2022. ((Photo by STEFANI REYNOLDS/AFP via Getty Images) / Getty Images)
“Inflation continues to churn above 3%, and once again shelter costs were the main villain. With home prices expected to rise this year and rents falling only slowly, the long-awaited fall in shelter prices isn’t coming to the rescue any time soon,” said Robert Frick, corporate economist at the Navy Federal Credit Union. “The good news is food prices didn’t rise last month, but the bad news is one of the other main pain points for consumers, transportation costs, rose quite a bit.”
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The Federal Reserve has signaled it is closely watching the report for evidence inflation is continuing to subside as policymakers try to determine what comes next for interest rates in 2024.
Central bank officials have opened the door to cutting interest rates this year, but indicated they will not do so until they are confident that inflation is conquered.
“The committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” Fed Chair Jerome Powell said last week while testifying on Capitol Hill.
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Stock futures rose Tuesday morning as investors shook off the surprisingly hot February inflation report. Market pricing still indicates the first interest rate cut will come in June, according to the CME Group’s FedWatch tool.
“Another hotter-than-expected CPI reading may breathe new life into the sticky inflation narrative, but whether it actually delays rate cuts is a different story,” said Chris Larkin, managing director of trading and investing at E*Trade. “Until [Fed officials] say otherwise, their plan is to cut rate cuts in the second half of the year. ‘Sticky’ doesn’t necessarily mean ‘overheating.’”
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As we look ahead to 2024, many homeowners and prospective buyers are wondering what to expect when it comes to mortgage rates. The landscape of the housing market is constantly changing, so it’s important to stay informed about trends and predictions. In this blog post, we will discuss some factors that could impact mortgage rates in 2024 and what homeowners and buyers can expect.
One factor that could impact mortgage rates in 2024 is the overall state of the economy. If the economy is strong and growing, we may see higher mortgage rates as the Federal Reserve looks to combat inflation. On the other hand, if the economy is stagnant or in a recession, we may see lower mortgage rates as the Fed looks to stimulate growth. It’s important to keep an eye on economic indicators such as GDP growth, unemployment rates, and inflation to get a sense of where mortgage rates may be heading.
Another factor that could impact mortgage rates in 2024 is Federal Reserve policy. The Fed plays a key role in setting interest rates, and their decisions can have a ripple effect on mortgage rates. If the Fed decides to raise interest rates in response to inflation, we may see an increase in mortgage rates. Conversely, if the Fed decides to lower interest rates to stimulate growth, we may see a decrease in mortgage rates. Keeping up with the latest news and announcements from the Fed can give homeowners and buyers a sense of where mortgage rates may be heading.
In terms of specific cities and local mortgage companies, it’s important to note that mortgage rates can vary depending on location and lender. For example, in a city like New York City, where real estate prices are high, mortgage rates may be higher compared to a city like Indianapolis, where real estate prices are lower. Additionally, local mortgage companies may offer competitive rates and terms compared to national lenders. For example, in New York City, local lenders like Quontic Bank and CrossCountry Mortgage may offer specialized products and services tailored to the needs of local buyers.
It’s important for homeowners and buyers to shop around and compare rates from multiple lenders to ensure they are getting the best deal. Websites like Bankrate and LendingTree can be helpful resources for comparing rates and terms from multiple lenders. Homeowners and buyers should also consider working with a mortgage broker who can help them navigate the lending process and find the best mortgage product for their needs.
In conclusion, predicting mortgage rates in 2024 is not an exact science, but there are several factors that could impact rates. By staying informed about economic indicators, Federal Reserve policy, and local market trends, homeowners and buyers can make informed decisions about their mortgage. Shopping around and comparing rates from multiple lenders is key to ensuring you are getting the best deal on your mortgage. Whether you’re looking to refinance your existing mortgage or buy a new home, it’s important to stay informed and be proactive in managing your mortgage.
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