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.&💛nbsp;

“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 figu♎re out where underlying inflation is.”

At the event, Kashkari didn’t comment on 澳洲幸运5开奖号码历史查询:today’s Consumer Price In🥀dex 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 e𓂃conomic activity. 

“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开奖号码历史查询:“lock-in” effect of 澳洲幸运5开奖号码历史查询:higher interest and mortgage rates for the slowdown, Kashkari said the issue ha💟s gotten 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 said.  “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 January 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 yea𒁏r 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 wor♕se-than-expected monthly data on consumer prices.  

“A lack o𝔉f progress on reducing inflation pushed long-term interest rates higher in the first quarter and this is acting as 𒅌a 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. Th▨ey’ve made homebuying less affordable, but also have pushed some buyers to consider new homes instead of existing ones. The supply of existing homes for sale is limited because many homeowners are reluctant to give up ultra-low mortgage ra✅tes 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 Bankers Association (MBAꦯ).

For the week ending May 10, applications for 澳洲幸运5开奖号码历史查询:mortgages increased by 0.5% compared 澳洲幸运5开奖号码历史查询:with the previous week.🅠 The drop comes as the 30-year, fixed-rate mortgage dropped to its lowest lev൩el in more than a month to 7.08%, according to the MBA.

Lower in🎃terest rates for home loans helped drive up refinancing activity, while home purchase applications were lower thi♛s week.

“While the downward move in rates benefits prospective homebuyers, 澳洲幸运5开奖号码历史查询:mortgage rates are still much higher than they were a year ago, while for-sale inventory remains tight,” said Joe🌃l Kan, MBA vic♑e president and deputy 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开奖号码历史查询: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开奖号码历史查询:several retail sales reports ܫover the past year have delivered better-thꦕan-expected results.

The lower retail sales numbers were spurred by a slowdown in car buying, as aut♉o 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 index is not adjusted for inflation, while clothing, elect💦ronic 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 tickꦺ🐼 lower than the 0.4% monthly increase the previous month, driven largely by increasing energy prices. 

This is a step back in the right direction for the Federal Reserve, which is waiting for confidence that inflation is sustainably moving 🔯toward its 2% annual goal.

High inflation has been tough on household budgets not only because of steeper prices fo﷽r 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 mort🔯gages and credit cards more expensive. 

Read more about today's inflation report here.