What it means for Fed rate choices
While monetary markets have upped their expectations for Fed rate hikes due to the fact that of the inflation dilemma facing the central bank, Kushi reiterated that the encouraging core reading appears to push back versus the most hawkish situations.
“The softer-than-expected regular monthly core reading likewise reduces the probability that policymakers will require to consider rate hikes,” she said. “The outcome is likely to reinforce the Fed’s current wait-and-see method and keep rate cuts on hold in the meantime.”
The reserve bank is due to make its next decision next week (June 17), the very first time it will fulfill under new chair Kevin Warsh.
On the other hand, the picture isn’t necessarily bleak for brokers and their clients, Kushi said, even if rates are showing no sign of a huge drop anytime soon.
“Home mortgage rates are driven more by inflation expectations and bond market conditions than by the federal funds rate itself, and today’s report uses little reason to anticipate a substantial decline in loaning costs in the near term,” she said.