Egg prices continue to skyrocket, but inflation is moving in the right direction. (ISTOCK))
Consumer prices fell 0.1% in March, according to the Consumer Price Index (CPI). Released by the Bureau of Labor Statistics (BLS). This is the first monthly drop since July 2022.
Annual inflation rose 2.4% compared to the 2.8% increase registered in February. Core inflation, excluding volatile energy and food prices, rose at a 2.8% pace last year, the smallest 12-month increase since March 2021, with a 6.3% drop in gas prices, compared to an increase in offsetting the electricity and natural gas index. However, food rose 0.4% in March. The meat, chicken, fish and egg index has risen 7.9% over the past 12 months, with the price of eggs alone increasing by 60.4%.
Inflation continues to move towards the 2% target rate for the Federal Reserve. Still, the impact of President Donald Trump's new tariff measures implementation could derail this progress and stifle economic growth, according to Jim Baird, chief investment officer at Plante Moran Financial Advisors.
“Consumers support the impact of tariffs on prices on many staples and discretionary products, so there is considerable uncertainty that the roughly duration of that impact is for growth and inflation, but each direction is more clear,” Baird said. “This has sent economists in a hurry to update their forecasts, reduce growth and increase the expected inflation for the year.”
Despite concerns about the impact of President Trump's tariffs, the Fed continues to stabilize interest rates and is not expected to make any significant changes anytime soon, including potential interest rate cuts. Tariffs could lead to higher inflation and slower economic growth, but the Fed has made the full impact of these policies more clear before deciding on course of action.
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Mortgage rates hit two months' lows this week and remain below 7%
A recession risks increasing
President Trump's tariffs also contribute to an increased risk of recession. Several major financial institutions, including Goldman Sachs and JP Morgan, have increased the odds of a recession. According to Baird, part of the problem is that if prices rise due to tariffs, consumers may decide to curb spending.
“The emotions have become sour in the past few months, and there are already signs of more constrained spending, not just a cautious mood,” Baird said. “Prices can go up, but that doesn't mean that consumers will pay the price of any product. Some may complain, but they may continue to spend, but many are more likely to trade with cheaper alternatives or delay discretionary purchases.
“The reality is increasing the chances of a more pronounced slowdown in the economy's pace and the risk of a recession is rising,” Baird continued.
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Spring home viewing season looks promising
Shelter inflation data for March showed a decline from 4.2% in February to 4.0%. That's good news, as shelter inflation has been a major force in recent years to boost inflation and could help move the needle with interest rates.
Mortgage rates continue to trend down, with under 7% for the 12th consecutive week, potentially driving spring sales, according to Sam Khater, chief economist at Freddie Mac.
“As the purchasing application continues to rise, the spring home viewing season is beginning to look more positive than last year,” says Khater.
According to the latest on Freddie Mac, the average 30-year fixed-rate mortgage for the week ending April 10th was 6.62% Major mortgage market research. This is down from the previous week, an average of less than 6.64% compared to 6.88% a year ago.
“Unfortunately, inflation remains painfully stubborn and far surpasses the Fed's 2% target, so we can lower interest rates,” said Gabe Abshire, CEO of Concierge. “Given the housing sector's low exposure to the current global trading environment, it will help the Fed to boost the spring and summer home buying market.”
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