| Overall inflation rose by 0.4% month-over-month and by 3.5% year-over-year, according to the BLS’s latest CPI report. Both metrics came in higher than the expected 0.3% MOM and 3.4% YOY growth. This makes it almost certain the Fed won’t cut rates in June. Already, mortgage rates have jumped to 7.37%, the highest since November of last year. |
| Core CPI, which excludes food and energy prices, also came in higher than expectations, rising 0.4% month-over-month (3.8% YOY) versus the predicted 0.3% (3.7% YOY). |
| 40% of the growth in core CPI is due to shelter inflation (or housing costs). Based on real time rent data, shelter inflation declined, but not to the degree market rent data would predict. |
Our take |
| Rental prices contributed to a hotter-than-expected CPI report. It’s possible that, due to the way the BLS calculates CPI inflation, these numbers are delayed and need more time to catch up. Another explanation: these divergent trends are caused by differences between CPI and market rent data. Whatever the case, it’s very likely interest rates are going to stay higher for longer, and so will mortgage rates. |
Rising inflation will likely delay rate cuts
