The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) Index, showed a 0.3% monthly rise in December, with annual inflation increasing from 2.4% to 2.6%, aligning with expectations. Core PCE, which excludes food and energy, remained steady at 2.8% year over year.
Shelter costs were the largest contributor to inflation, rising 0.3% for the month but showing signs of moderation. However, the reported annual shelter inflation of 4.7% is higher than real-time data from CoreLogic, which estimates it at 1.5%. If shelter were more accurately reflected, core PCE would be closer to 2.2% instead of 2.8%.
As inflation cools, fixed investments like bonds garner more attraction from investors. As bond purchasing increases and their supply gets sopped up, bond pricing increases, and yields decrease, which bodes well for mortgage interest rates.
Source : www.mbshighway.com
By: Jon Iacono