It may be time for the Fed to cut interest rates
“Mortgage rates are plunging with the news of inflation calming. Consumer prices rose by 3.2% in September, even with the rent component still showing a hefty gain of 6.7%,” the NAR analyst said. “Non-official private sector rent data has shown a 0% to 2% rise, which, if hypothetically used in the official figures, would bring inflation down below the Federal Reserve’s desired inflation target of 2%.”
He urged the Fed to cut interest rates rather than increasing them as they have been primarily doing: “The interest rate rises should be over, and the Fed will have to consider cutting interest rates seriously,” he said. “In the meantime, the bond market is reacting as if the Fed will be cutting interest rates next year. Mortgage rates look to head towards 7% in a few months and into the 6% range by the spring of 2024.”
The mood was downright jubilant at Seeking Alpha, which categorized this week’s CPI report as “clearly a shock to the consensus as the rate of inflation fell more than had been anticipated.” For Seeking Alpha analyst Lawrence Fuller, it was a case of “I told you so”.
“I have been preaching for the past year that the rate of inflation would fall as fast as it rose, and this report supports that assertion,” he said. The latest CPI report “…ends the discussion of rate hikes and should also end the discussion about rates staying higher for longer.”
CPI report hints at potential year-end rally
The everyday consumer comes out ahead in this scenario: “It looks like the little guy was one step ahead of Wall Street this time around,” Fuller said. “The professional money management community has been extraordinarily bearish as of late, which means there is plenty of fuel left for our year-end rally.”
