Inflation Eases, Paving Way for Potential Sept Rate Cut

Rates are FLAT?to end the week.? Check em' out and then read our 30 second commentary below. Rates are examples for network use only: Pricing as of 7/26/2024 at 10:50 am.

Inflation Eases, Paving Way for Potential Sept Rate Cut ?

Economic Indicators Point to Softening Inflation

Positive news on the inflation front emerged this week as the Federal Reserve’s preferred measure showed a slight cooling. The Personal Consumption Expenditures (PCE) price index, which increased 0.1% month-over-month and 2.5% year-over-year in June, aligned with analyst expectations. While still above the Fed’s 2% target, this data point bolsters the case for a potential interest rate cut in September.

Core PCE, which excludes volatile food and energy prices, also came in line with estimates, rising 0.2% monthly and 2.6% annually. This metric is closely watched by policymakers as a better indicator of long-term inflation trends.

Consumer Spending Holds Steady

Despite a modest increase in personal income, consumer spending remained relatively strong. However, the savings rate dipped to its lowest level since November 2022 as spending outpaced income growth.

Mortgage Market Continues to Weaken

The housing market showed no signs of improvement, with mortgage application numbers declining for the purchase of homes and remaining essentially flat for refinancing.

Market Reaction and Outlook

Stock market futures reacted positively to the inflation data, while Treasury yields declined. Investors are increasingly betting on a more aggressive path of interest rate cuts by the Federal Reserve. While the upcoming Fed meeting next week is unlikely to result in any policy changes, September is now firmly in focus as a potential timeline for the first rate reduction since the early days of the pandemic.

Stay Informed

We'll continue to monitor mortgage rate trends and keep you updated in future newsletters.