The Consumer Price Index (CPI), the main measure of inflation, rose 0.2% in September, a similar increase. increase observed by consumers in August and July, the Bureau of Labor Statistics reported.
Over the past 12 months, the index rose 2.4%, the smallest annual increase since February 2021. Rising food and shelter costs accounted for 75% of the total increase in September. The housing index rose 0.2% in September, while the food index rose 0.4%.
Higher auto insurance premiums, medical care costs and airfares also contributed to the rise in the CPI. These increases are offset by the leisure and communications indexes, which both declined month-over-month in September.
Energy costs also fell significantly in September. The energy index fell by 1.9% over the month, after a drop of 0.8% in August.
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As inflation approaches 2%, the Fed could soon cut rates
Even though the CPI rose in September, the increase was not as large as it has been over the past three years, signaling to the Fed that it may be time to lower rates again. rate.
The Federal Reserve aims for inflation of 2% before cutting rates significantly. A slight increase in the CPI is therefore good news for consumers, even if high prices for real estate and food products persist.
Experts predict the Fed is poised to cut rates soon, after a reduction of half a percentage point in September. This is the first rate cut in four years and has had a direct impact on mortgage rates.
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Mortgage rates are in trouble, hovering around 6%
Mortgage Rates reached its lowest level in two years after the first interest rate cut in September, with 30-year rates fall to 6.08%. The drop in rates was temporary as rates continued to rise. As of October 3, 30-year mortgage rates averaged 6.12%. according to Freddie Mac.
The short-lived drop in rates had a positive effect on the market, with pending home sales increasing by 2% year-on-year in early October, Redfin reported. This increase is the largest increase in three years. Buyers flooded the market after the federal government’s initial rate cut, aided by weeks of slow rate declines in August.
Potential buyers shouldn’t get too excited, however. Experts do not predict a rate cut much more, but possible rate cuts at the end of the year could change this outlook. Major lenders don’t expect rates to fall below 6%, and many expect rates to hover between 6.2% and 6.4%.
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