Housing costs remain high, but insurance premiums are finally starting to stabilize. (iStock)
Annual inflation fell below 3% in July for the first time in more than three years. Consumer Price Index The Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS).
On an annualized basis, prices rose 2.9% in July, slowing slightly from the previous month’s 3.1% increase. On a monthly basis, they rose 0.2% after falling 0.1% in June. The last time overall CPI inflation fell below 2.9% was in March 2021. Core inflation, which excludes more volatile food and energy prices, rose 0.2% monthly in July.
Inflation is approaching the Federal Reserve’s 2% target, but the prices of many basic goods remain high. Most troubling are housing costs, which rose 0.4% in July and accounted for 90% of the monthly inflation increase. Housing costs have risen by more than 5% over the past year.
“This is significant because it makes up a large portion of the index, but housing costs are notoriously difficult to measure precisely and are often thought of as lagging moves,” said Jim Baird, chief investment officer at Planet Moran Financial Advisors. “Other indicators suggest housing costs are likely to fall further in the coming months.”
Still, July’s inflation reading will likely give the Fed a basis to approve a rate cut in September, potentially triggering further cuts before the end of the year.
“Finally, price growth at the register continues to slow after years of painful spikes, signaling a victory for the Fed’s monetary policy,” said Thelma Hepp, chief economist at CoreLogic. “For average Americans, this means the Fed is likely to cut interest rates next month, which will bring borrowing costs down a bit — a positive step for auto and home sales in particular.”
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Auto insurance rates are finally on the decline
Consumers may start to see an easing in auto insurance rates, which have been one of the biggest drivers of overall inflation in recent months, according to Josh D’Amico, vice president of insurance operations at Jerry’s. While July’s 18.6% hike is still hard on consumers’ wallets, D’Amico said it’s good to see the steep rise in premiums finally slowing.
Insurance rates have skyrocketed in recent years as inflation has driven up the cost of auto repairs and drivers have filed more insurance claims, but there are signs of hope as auto repair costs and vehicle prices are stabilizing, D’Amico said.
“Several carriers I’ve spoken to have begun reducing rates, and many in our network have told me they are reconsidering rate increases they’ve made or planned to make,” D’Amico said. “We appear to have reached a critical juncture, and U.S. drivers can expect some relief.”
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Mortgage rates are heading in the right direction
Mortgage rates have been moving in tandem with strong economic data, making it increasingly clear that the Fed will begin easing monetary policy this year.
Lower mortgage rates and increased housing inventory should help encourage potential homebuyers and provide refinancing opportunities for existing homeowners.
“In the medium term, we expect the economy to recover slowly and housing inventory to continue to recover,” said Ralph McLaughlin, senior economist at Realtor.com. “This will put downward pressure on mortgage rates this fall and winter, leading to a much better season for homebuyers in 2025.”
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