Kashkari Says Fed Still Needs to ‘Figure Out’ Inflation

Minneapolis Fed President Neel Kashkari reiterated the Federal Reserve is committed to reducing inflation to the 2% target, even if that means holding interest🐼 rates at current levels for a longer period. 

“It might just take a higher rate environment, at least for the near term, to achieve it,” Kashkari told the Williston Basin Petroleum Conference today.  “We probably need🧜 to sit here for a while longer until we figure out where underlying inflatio♕n is.”

At the event, Kashkari didn’t comment on 澳洲幸运5官方开奖结果体彩网:today’s Consumer Pr⛄ic🅺e Index inflation print, which came in cooler than expected. He said the biggest uncertainty with the current economy is how much downward pressure interest rates are✤ putting on economic activity.&nbs💝p;

“It seems like there is more resilience in the economy than I had🐈 expected,” said Kashkari, who said the current interest rate level may only serve to put “one foot on the brake and not two.”

In his remarks, Kashkari said he remained focused on the impact of inflation in the housing market, which is suffering from “pent-up” demand due to a shortage of housing. However, while some economists have pointed to the so-called 澳洲幸运5官方开奖结果体彩网:“lock-in” effect of 澳洲幸运5官方开奖结果体彩网:higher interest and mortgage rates for the slowdown, Kashkari said the issue has gotte⛦n too much attention because it affects both sides of the “housing equation.” 

“This notion that people aren’t selling—and I agree, you’re right—these people also aren’t buying,” Kashkari ജsaid.  “So it takes supply out of the market, but it also takes demand out of the market.”

-Terry Lane

Homebuilders Lose Confidence Amid Rising Mortgage Rates

Homebuilders lost confidence in their prospects for sales in early May, the first decrease in six months, as rising mortgage rates worsened the outlook for buyers.

The National Association of Home Builders/Wells Fargo Housing Market Index fell to 45 in May from 51 in April, the association said Wednesday. Notably, it dipped below the “breakeven” point of 50 and reached its lowest since Ja✱nuary according to the index, which is based on surveys of house construction companies. 

A key factor in the downturn was mortgage rates, which have risen in the first few months of the year and have hovered over 7% since mid-April ♏according to Freddie Mac. Those rates are tied to investor concerns about inflation, which turned sour at the outset of 2024 after a string of worse-than-expected monthly data on consumer prices.  

“A lack of progress on reducing inflation pushed long-term interest ra༒tes higher in the first quarter and this is acting as a drag on builder sentiment,” NAHB Chief Economist Robert Dietz said in a commentary. 

🎃High mortgage rates have had a complex effect on the market for newly built homes. They’ve made homebuying less affordable, but also have pushed some buyers to consider new homes instead of existing ones. The supply of existing homes꧒ for sale is limited because many homeowners are reluctant to give up ultra-low mortgage rates they secured in the pandemic era or earlier for today’s higher ones.

Mortgage Demand Rides Interest Rate Waves Once Again

Demand for mortgages rose again last week, coming on another dip in borrowing costs for home loans, according to data from the Mortgage Ban🐠kers Association (MBA).

For the week ending May 10, applications for 澳洲幸运5官方开奖结果体彩网:mortgages increased by 0.5% compared 澳洲幸运5官方开奖结果体彩网:with the previous week. The drop 𝄹comes as the 30-year, fixed-rate mortgage dropped to its lowest level in more than a month to 🐠7.08%, according to the MBA.

Lower interest rates for home loans helped drive up refinan🐈cing activity, while home purchase applications were lower this week.

“While the downward move in rates benefits prospective homebuyers, 澳洲幸运5官方开奖结果体彩网:mortgage rates are st🌳ill much higher than they were a year ago, while for-sale inventory remains tight,” said Joel Kan, MBA vice president and d💦eputy chief economist. 

-Terry Lane

Retail Sales Were Flat In April As Consumers Slow Spending

Consumer spending appeared to slow down in April, coming in relatively unchanged compared with March’s downwardly revised levels and below economists' forecast. 

The Census Bureau reported that April retail sales were $705.2 billion, just above the adjusted 澳洲幸运5官方开奖结果体彩网:March totals. Economists were expecting a 0.4% increase in sales this month. The drop is a noteworthy reversal in consumers’ spending trends, as 澳洲幸运5官方开奖结果体彩网:several retail sales reports over ♛the past year have delivered better-than-expected result🌌s.

The lower retail sales numbers were spurred by a slowdown in car buying, as auto dealers reported💫 that sales were lower by🎉 0.8%.

E-commerce businesses 🗹lost ground this month as nonstore retail sales were lower by 1.2%, though online sales were higher when compared with April last year. Gas station sales were up by more than 3% as the inde🌠x is not adjusted for inflation, while clothing, electronic and appliance stores also increased sales in April. 

-Terry Lane

Inflation Takes a Step Back in April

The cost of living as measured by the Consumer Price Index rose 3.4% over the year in April, down from a 3.5% increase in March, according to data from the Bureau of Labor Statistics Wednesday. That matched economists' predictions and was the first time this year that price growth came in as expected. For the first three months of the year, inflation surprised coming in hotter than expected.

On a monthly basis, the index rose 0.3%, a tick lower than the 0.4% monthly increase the previous month, drive﷽n largely by inc⛄reasing energy prices. 

This is a step back in the right direction for the Federal Reserve, which is waiting for confidence that in🐎flation is sustai💙nably moving toward its 2% annual goal.

High inflation has been tough on household budgets not only because of steeper prices for things like gas and groceries but also because it’s forced the Federal Reserve to delay cutting🐻 its benchmark interest rate. The decades-high interest rate has made borrowing through loans such as mortgages and credit card🍃s more expensive. 

Read more about today's inflation report here.