Inflation came in higher than forecast in February which some economists say could help keep borrowing costs higher for longer.
Higher than forecast inflation in February has some economists worried that borrowing costs will remain elevated for longer. The reading suggests that prices may take longer to slow their rate of increases before the central bank can cut interest rates.
The Consumer Price Index (CPI) inflation rose by 3.2 percent on a yearly basis last month, a 0.1 percent increase compared to January and much higher than the Federal Reserve’s target of 2 percent. Bloomberg economists had forecast a 3.1 percent acceleration in prices compared to a year ago. On a monthly basis, inflation ticked up by 0.4 percent.
Policymakers hiked rates at their most aggressive pace since the 1980s to battle inflation that had at point soared to 40-year highs in the summer of 2022. The Fed’s funds rate, which now sit at 5.25 to 5.5 percent, are at their highest in more than 20 years and have contributed to elevated borrowing costs for everything, including mortgages.
Mortgage rates hit their peak of 8 percent last fall, but fell to a mid-6 percent level towards the end of the year and in early 2024 on the back of expectation of Federal Reserve cutting rates early in the year.
