Latest inflation data is providing hopes that the Fed could begin cutting rates in the near term, according to a recent report from the California Association of Realtors (CAR).
The financial market has been reacting positively to the good news which has led to mortgage rates dropping more than 30 basis points since early July. As rates trend down, the housing market is seeing more buyers and sellers reentering the market, said the report, adding that the momentum could continue if rates begin declining more consistently, and July could become the turning point of a strong second half for the housing market.
The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent on a seasonally adjusted basis, according to the US Bureau of Labor Statistics, after being unchanged in May.
Over the last 12 months, the all items index increased 3.0 percent before seasonal adjustment.
The index for gasoline fell 3.8 percent in June, after declining 3.6 percent in May, more than offsetting an increase in shelter. The energy index fell 2.0 percent over the month, as it did the preceding month.
At the same time, the index for food increased 0.2 percent in June. The food away from home index rose 0.4 percent over the month, while the food at home index increased 0.1 percent, according to the Bureau report.
Excluding energy and food prices, the core CPI rose 0.1% from May and 3.3% from a year ago, the CAR report noted. Both measures exceeded expectations, and recorded the smallest gains since more than three years ago.
The slowdown in inflation was broad-based, with core goods prices down once again while core services prices up only 0.1%. The latest inflation data could be one of the most encouraging reports since the Fed first started fighting inflation, said CAR, and might have put the central bank one step closer to reducing the fed funds rate in its September FOMC meeting.
At the same time, said CAR, weaker jobs reports and cooler-than expected inflation data in the past couple of weeks continued to fuel speculations that the first Fed’s rate cut is getting closer and closer as the economy moved into the second half of the year.
According to Mortgage News Daily, interest rates have also been declining since the beginning of July and its winning streak had been extended to its eighth straight day as of July 15.
At 6.81%, the average 30 year Fixed-Rate Mortgage (FRM) reached the lowest level in five months in the mid of July.
