By KIMBERLEY HAAS
Industry leaders are speculating about what officials at the Federal Reserve will do concerning rate increases during their meeting this week.
In May, Federal Reserve Chair Jerome Powell said they were prepared to raise rates again if economic conditions worsened, but hinted at a wait-and-see attitude regarding this month’s meeting. Policymakers may even skip raising rates after a smaller than expected rise in the Consumer Price Index, released on Tuesday.
CNN reporter Matt Egan said the CPI report gives officials the cover they need to hold off on increasing rates this month.
“Investors are becoming increasingly confident that the Fed is going to keep interest rates steady after … 10 consecutive interest rate hikes. The Fed has been moving more aggressively than it has at any point since the early 1980s, but at last check, markets are pricing at a 94% chance that the Fed keeps rates steady tomorrow. That is up from an 80% chance yesterday,” Egan said on Tuesday.
Egan said this would be good news for the markets and consumers who are already dealing with high borrowing costs for items such as mortgages.
Joel Kan, vice president and deputy chief economist for the Mortgage Bankers Association, said he also expected a pause in rate hikes while speaking at the National Association of Real Estate Editors conference in Las Vegas last week.
Kan said if the market moves in the way he projects, this could mean mortgage rates in the lower 5% range next year. Although mortgage rates are not dictated by the Feds, they are influenced by what officials do.
Chief Economist Lawrence Yun of the National Association of Realtors issued a statement after receiving the latest CPI data. He predicts potential rate cuts in the near future.
“Inflation calmed down in May, and further deceleration looks likely in the upcoming months. It also marks the first month in two years that wage growth outpaced consumer price inflation, improving the average standard of living,” Yun said. “Moreover, low inflation means that the Federal Reserve should stop raising interest rates and possibly slash rates towards the year-end or early next year.”
There will be a press conference on Wednesday following the Federal Open Market Committee meeting.
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