John’s Finance Corner: Consumer Inflation and Future Fed Rate Cuts

John’s Finance Corner: Consumer Inflation and Future Fed Rate Cuts

Consumer inflation is on the rise, and the Federal Reserve is discussing future rate cut plans. 

The most recent CPI Inflation report for October showed a 0.2% increase month-over-month, with a year-over-year reading of 2.6%, up from September’s 2.4%. Core CPI, which excludes food and energy, increased by 0.3% in September month-over-month, with a year-over-year reading stable at 3.3%. While inflation appears more controlled compared to the peak in 2022, the most recent three-month average shows an upward trend.

The latest Wholesale inflation data from the Producer Price Index (PPI) revealed a 0.2% rise in October, with the year-over-year reading jumping from 1.9% to 2.4%. Core PPI increased by 0.3% for the month, with the year-over-year reading inching higher to 3.1%.

Retail Sales data for October showed a 0.4% increase, exceeding expectations and indicating strong consumer spending as we head into the Holiday season. Bond markets tend to react negatively to increased spending, as it can suggest a stronger economy than perceived.

Last week’s initial jobless claims decreased by 4,000 from the previous week, with continuing claims also dropping by 11,000. The bond markets follow weekly claims data closely, and a decrease in claims signals a stronger labor market than many economists believe.

The bottom line: An increase in inflation and retail sales, along with a decrease in initial and continuing jobless claims, caused the 10-year treasury to rise last week, pushing mortgage rates to levels not seen since July. With limited economic data expected this week, we must keep an eye on geopolitical issues that could influence markets. Federal Reserve Chairman Jerome Powell spoke last week, stating that the Fed does not need to rush to continue lowering the Fed Fund Rate, after previously expecting a full percentage point drop in 2025.

Stay tuned for more updates as we navigate these economic developments together.

John Lamberg

NMLS 189233