This morning’s report on consumer prices came in exactly in line with expectations: The consumer price index (CPI) rose 0.2% month over month in July for both headline inflation and core inflation. That’s the same increase we saw in June, which I interpret as continued good news on inflation.
Based on the July data so far (released in August), it’s hard to see another rate hike from the Fed in their September meeting. There is another month of data before their meeting, in which we could see some volatility in CPI from goods and medical services, but shelter should continue to fall. But even if we see one month of bad data (i.e. higher inflation rates) in August, one could make the argument that the Fed should pause in September and wait for more data to see if another hike is warranted in November.
For housing, there is still some risk of unexpectedly bad news on inflation, but it feels like we’re at the top of the cycle for rates. And we can expect rates to very slowly come down toward the end of this year into next year.
