Mortgage rates have some room to come back down in June after PCE price index shows annual inflation easing to 2.65 percent in April, and Q1 2024 GDP growth revised downward to 1.3 percent.
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Mortgage rates have some room to come back down in June after a key inflation metric moved in the right direction in April, reviving speculation in bond markets that the Fed will start cutting rates as soon as September.
The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, eased to 2.65 percent in April, the Commerce Department’s Bureau of Economic Analysis reported Friday.
That’s only a slight improvement from the 2.70 percent annual growth registered in March, but the PCE price index is once again inching closer to the Fed’s 2 percent inflation target. The index had previously dipped to 2.46 percent in January, before moving in the wrong direction in February and March.
PCE and Core PCE trending down
Core PCE, which excludes the cost of food and energy and can be a more reliable indicator of underlying inflation trends, dropped to 2.75 percent in April and has been steadily falling since January.
Ian Shepherdson
“The inflation numbers alone will not be low enough to trigger a Fed easing by September — payroll growth will need to slow markedly, too,” Pantheon Macroeconomics Chief Economist Ian Shepherdson said in a note to clients. “But that’s also our base case, given the clear weakening in the employment components of key business surveys.”
Futures markets tracked by the CME FedWatch Tool on Friday showed investors are pricing in a 53 percent chance of at least one Fed rate cut by Sept. 18, up from 46 percent on April 30. But futures markets, which at the beginning of the year were predicting six Fed…