The likelihood of a third rate cut by the Federal Reserve rose with Wednesday’s Consumer Price Index from the US Bureau of Labor Statistics, which met economists’ expectations about inflation.
Headline inflation in November rose 2.7% year-on-year and 0.3% compared to October. Core inflation – which excludes variable food and energy costs – rose 0.3% month-on-month and 3.3% year-on-year.
Inflation for shelter costs remains high, rising 0.3% for the month, but that number represents a cooling from a 0.4% jump the previous month. Housing accounted for 45% of inflation. Taken together, the report is good news for the real estate industry, which is desperate for mortgage rates to drop.
“Although the Fed will reduce interest rates again next week, it will take some time before this reduces household costs,” he said. Move the Concierge CEO Gabe Abshire in a statement. “If consumer prices don’t start to fall soon, and inflation remains stubborn, the Fed probably won’t cut interest rates much in the near future.”
Annual core inflation has fallen sharply since rising 6.3% in August 2022, as have annual shelter costs, which rose 8.2% in March 2023. This is little comfort to consumers, who have experienced low wages while prices continue to rise.
Inflation has been widely cited by voters as the reason they chose Donald Trump over Vice President Kamala Harris, who is part of an administration that has overseen rapid increases in consumer spending. Economists believe that rampant inflation is what is behind the disruption of lines during the violence and the two major COVID-19 stimulus bills that were passed in 2020 and 2021.
Although inflation was the issue that won Trump, his election is clouded by his proposal to increase tariffs on Mexico, Canada, and the so-called BRICS countries, which include China, Brazil and Russia. Economists strongly believe that the size of the bill will increase consumer spending, especially in newly built homes. The new construction industry may also face labor shortages if Trump follows through on his promise to deport more immigrants.
“This divergence in inflationary pressures will have an impact on the story of the two housing markets in 2025,” it said. Bright MLS Chief economist Lisa Sturtevant said in a statement. “High income earners and families will be more active in the market. Existing homeowners who have accumulated significant home equity will be in a good position to purchase a move. But low-income people and families looking to buy a home in 2025 face tighter budgets, more financial pressures, and the housing market will get more challenging. “
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