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<div type="image" title="In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit" msid="114284206" hostid="261" caption="&amp;lt;p&amp;gt;In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Or, if it leaves the rates unchanged, your EMIs wont budge one bit&amp;lt;/p&amp;gt;"></div> On September 18, 2024, the <keyword id="19951097" type="General" weightage="20" keywordseo="us-fed" source="keywords">US Fed</keyword> delivered a jumbo-sized surprise to the global economy. Not only did they trim their interest rates by a massive 50 basis points to bring their yields down to 5%, but also hinted at further rate cuts in the upcoming months. This move from the fed and several other central banks globally had pushed expectations high for a similar rate slash closer home, from the <keyword id="19899808" type="General" weightage="100" keywordseo="rbi" source="keywords">RBI</keyword> this month. But governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword>, in a “picture abhi baaki hai” moment, decided to hold the repo rates here steady, leaving them unchanged at 6.5% for the record 10th straight time. Although, he did tinker with the policy stand, changing it from “rate cuts are absolutely off the table” to a more accommodating “we’re okay with bringing down the rates, if needed”. This, rather neutral, stance from India’s financial custodian sparked hopes for a rate cut in December this year. However, the stubborn <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> levels in September have again dented such hopes. As consumers, you may be wondering what all the hullabaloo this is about, since it hardly makes a difference to your regular financial routine. Well, the majority of both economic growth and inflation is closely connected to this policy stance from the central bank and it does have a rather indirect effect on both our earnings and spending. But more directly, it would have clear implications for those looking to own a house. Even the slightest modification of interest rates, or the lack of it, influences the <keyword id="19916018" type="General" weightage="20" keywordseo="emi" source="keywords">EMI</keyword> you pay significantly. So, all aspiring homebuyers, is this the right time to take out a loan and buy a house? Can you expect a rate cut anytime soon, and what will that mean for your home-owning dreams? We lay it out. <h2>What’s the connection?</h2>You see, buying a house is no small feat, at least financially. The task becomes even more herculean if you are scouting for your own roof in cities like Delhi, Noida, Bangalore or Mumbai where, as Circuit from Munnabhai says, “room shuru hote hi khatam ho jata hai”. Naturally, you’ll have to take a <keyword id="6354730" type="General" weightage="20" keywordseo="Home-loan" source="Orion">home loan</keyword> from the bank. Don’t be mistaken, the bank won't give you a loan that covers 100% of the value of the property you want to own. Rather, your loan amount will be equivalent to a certain percentage of the property’s total value. RBI’s guidelines on this are pretty clear: <ul><li>If your loan amount is up to Rs 30 lakh, you can get a loan worth 90% of the property’s value.</li></ul><ul><li>If the loan amount is between Rs 30 lakh and Rs 75 lakh, you are eligible for a loan worth 80% of the property’s value. </li><li>If you are taking a loan of more than Rs 75 lakh, your loan amount will be equivalent to 70% of the property’s value. </li></ul>Now assuming that you have the money, it's all about paying back the principal amount, but not without a little (read hefty) interest added on top. See, when you’re taking a home loan, you are actually signing up for a long-term, even multi-decadal financial commitment, which will unfailingly present itself to your bank accounts and finances every single month, in the form of EMIs, or equated monthly instalments). When you take a home loan, you can choose to pay the interest in two ways (talk about choices!). One is that you decide to keep a fixed rate of interest throughout the tenure of your home loan. So, if you opt for a 25-year fixed-rate home loan at the rate of 8.8% p.a., you’ll have to pay interest at this rate for the next 25 years, till your entire loan is paid off. Yes, you can go backsies and switch to a floating-rate home loan by paying a fee. Floating, as the name suggests, means that your interest rate is not set in stone. But starting October 2019, when it comes to a floating interest rate home loan, your payable interest and EMIs are directly impacted by any changes in <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword>, which were left unchanged by RBI this time around. Why are these two so chummy, you might ask. Well, <keyword id="173069" type="General" weightage="20" keywordseo="Home-loan-interest" source="Orion">home loan interest</keyword> rates are a sum of two things: <ol><li>Repo Rate (the rate at which RBI lends money to banks)</li><li>Operational cost + margins</li></ol>Any plus or minus in this equation would send your home loan interests tanking, or skyrocketing. Vivek Iyer, Partner, Grant Thornton Bharat explains that any change in the repo rates impacts the cost of funds and thereby the home loan interest rates. “When the interest rates are expected to reduce, the corresponding impact will be in the form of a reduced EMI. Home loan borrowers should always try to borrow at a floating rate when interest rates are expected to reduce and at a fixed rate when the interest rates are expected to increase. This minimizes the outflow in the form of EMIs that the home loan borrowers will experience”, he continues. So, no change in repo rates means no change in your home loan interest payout and no financial relief whatsoever. A rate cut, which most experts are anticipating will start this December, would mean your EMI payments come down, and your wallet might save a little more. But there’s also a chance of an UNO reverse happening. In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Consider this. You took a floating interest rate home loan worth Rs 50 lakh in January 2022 at 8% p.a., for a period of 20 years. This brings your total monthly EMI to Rs Rs 41,822. But, as luck would (or won't) have it, RBI raised the interest rate by 250 basis points between May 2022 and February 2023, bringing it to its current status of 6.5%. Some back-of-the-envelope calculations suggest that now, your home loan interest payout will also rise by a hefty 2.5%, taking the total to 10.5%. In other words, you’ll have to dish out Rs 49,919 per month as EMI. Now, won't you heave a sigh of relief if the RBI were to bring down the interest rate by say, even 50 basis points, or 0.5%? Agreed, your EMI will come down just marginally, to Rs 48,251. But look at this over a 20-year period, and you’ll see how big the difference is. <h2>Are rates set to change anytime soon?</h2>Generally, RBI hikes the repo rates if it sees inflation spiralling out of control. Then, in a bid to reduce consumer spending, it raises interest rates to make borrowing expensive. But when the apex bank sees sluggish consumption in the economy, inflation in control and wants to boost spending, it slashes down on interest rates, making it more lucrative for people to borrow. As of now, most experts are not anticipating any changes in the interest rates anytime soon. This means home loans are not getting cheaper anytime soon. The CPI data, which came out yesterday, saw inflation rise to 5.49% in September, compared to 3.65% last month. Food and beverage prices jumped to a four-month high of 8.36% in September, as opposed to a 5.3% rise in August. So a rate cut seems a no-go at the moment! Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities explains that the RBI had probably expected a hardening of inflation and that's why it chose to hold on to the rates in the monetary policy announcement last week. “Now, it seems that RBI will take a cautious stance going ahead and will not be in a hurry into rate cuts like its global peers”, he added. In all this, one thing is clear, in the grand movie of the Indian economy, the RBI has chosen stability over drama. And just like in every good Bollywood film, we're left wondering what twist the sequel will bring. Until then, it might be “The End" for rate cuts, but the show must go on for the Indian economy!

Simply Put: Boom or bust — how RBI’s decision to leave rates unchanged affects homebuyers

<ul class="summary-list"><li>US stocks traded mixed on Wednesday as traders took inflation data and the outlook for rates.</li><li>Inflation rose 0.2% for the month and 2.6% on a yearly basis, in-line with expectations.</li></ul>The latest inflation data dented some of the momentum of the post-election stock rally, with traders focusing on the latest consumer price index reading at its implications for rate cuts. The Dow Jones Industrial Average was up slightly, while the S&amp;P 500 ended the day nearly flat. Bond yields were little changed, with the 10-year Treasury yield up one basis point to 4.449%. <a target="_blank" class="" href="https://www.businessinsider.com/inflation-october-cpi-consumer-price-index-federal-reserve-interest-rates-2024-11">Inflation was slightly higher</a> year-over-year in October compared to the prior month, but was on par with economists' expectations. Consumer prices rose 0.2% for the month and 2.6% on an annual basis, higher than last month's 2.4% increase.Investors solidified bets on another rate cut at the Federal Reserve's December policy meeting. Markets see an 82% chance that the central bank will trim interest rates another quarter-point next month, up from 59% on Tuesday, according to the CME FedWatch tool.Traders are less certain about another rate cut in January. The odds of another 25 basis point cut at the Fed's January meeting have dropped to 29%, down from 69% a month ago."Inflation data mostly support another rate cut at the Fed's December decision," Bill Adams, the chief economist at Comerica Bank, said in a note. "The Fed will wait until they have more clarity about the timing and scope of policy changes from the next President and Congress before reacting to them.""The Fed wants to avoid the mistakes of the past by prematurely easing and risking a second wave of inflation, so we'd expect the FOMC to take this risk seriously," Jason Pride, the chief of investment strategy &amp; research at Glenmede, said in a note. "This doesn't take a rate cut off the table for December, but it's certainly not a slam dunk."The rally fueled by Trump's election began to stumble, with the tech-heavy Nasdaq Composite edging slightly into the red.Crypto markets, though, continued to get a boost after Elon Musk, a close ally of Trump, was appointed as co-head of the <a target="_blank" class="" href="https://markets.businessinsider.com/news/currencies/dogecoin-price-elon-musk-doge-department-trump-crypto-president-election-2024-11?_gl=1*j5rjww*_ga*OTI1ODIwOTQ2LjE3MTYzOTg2NjU.*_ga_E21CV80ZCZ*MTczMTUyNDI1NS41NTYuMS4xNzMxNTI0MjY2LjQ5LjAuMA..">Department of Government Efficiency</a>, or "DOGE." <a target="_blank" class="" href="https://markets.businessinsider.com/currencies/doge-usd">Dogecoin</a> spiked another 15% on the news, while <a target="_blank" class="" href="https://markets.businessinsider.com/currencies/btc-usd">bitcoin</a> rose as much as 6% before paring its gains, surpassing the $90,000 threshold for the first time ever before dipping back below to about $88,000 later in the day. Here's where US indexes stood at the 4:00 p.m. closing bell on Wednesday:<ul><li><a target="_blank" href="https://markets.businessinsider.com/index/s&amp;p_500?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets">S&amp;P 500</a>: 5,985.38, up 0.02%</li><li><a target="_blank" href="https://markets.businessinsider.com/index/dow_jones?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets">Dow Jones Industrial Average</a>: 43,958.19, up 0.11% (+47.21 points)</li><li><a target="_blank" href="https://markets.businessinsider.com/index/nasdaq_composite?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets">Nasdaq composite</a>: 19,230.74, down 0.26%</li></ul>Here's what else is going on:<ul><li>Here's what people are betting in <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/kalshi-polymarket-prediction-markets-jake-paul-mike-tyson-bitcoin-trump-2024-11?_gl=1*4l4ww*_ga*OTI1ODIwOTQ2LjE3MTYzOTg2NjU.*_ga_E21CV80ZCZ*MTczMTUxNTY1NS41NTUuMS4xNzMxNTE4NTU0LjU2LjAuMA..">prediction markets</a> now that the election is over.</li><li><a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/nvidia-stock-price-outlook-upside-blackwell-rubin-apple-iphone-moment-2024-11">Nvidia is approaching its iPhone moment</a> with its Blackwell chip, and the stock could soar another 25%, an analyst said. </li><li>Trump could push <a target="_blank" class="" href="https://www.businessinsider.com/trump-us-debt-levels-government-borrowing-treasury-blackrock-rick-rieder-2024-11">US debt to levels</a> that can't be ignored within his first year in office, according to BlackRock's Rick Rieder.</li></ul>In commodities, bonds, and crypto:<ul><li><a target="_blank" href="https://markets.businessinsider.com/commodities/oil-price">West Texas Intermediate</a> crude oil dipped 0.09% to $68.08 a barrel. <a target="_blank" href="https://markets.businessinsider.com/commodities/oil-price">Brent crude</a>, the international benchmark, was lower by 0.46% to $71.95 a barrel.</li><li><a target="_blank" href="https://markets.businessinsider.com/commodities/gold-price">Gold</a> slipped 0.87% to $2,575.98 an ounce.</li><li>The 10-year Treasury yield was up one basis point to 4.449%</li><li><a target="_blank" href="https://markets.businessinsider.com/currencies/btc-usd">Bitcoin</a> slipped to $88,615.</li></ul>

Stock market today: Indexes trade mixed as investors assess rate outlook after new inflation data

<ul class="summary-list"><li>Headline inflation cooled as expected in August, rising 2.5% from a year ago.</li><li>But core inflation came in hotter than expected, driven by housing costs.</li></ul><a target="_blank" href="https://www.businessinsider.com/personal-finance/investing/what-causes-inflation">Inflation</a> slowed in August in line with expectations.The consumer price index, published by the Bureau of Labor Statistics, increased 2.5% over the year from August 2023 to this past August, matching the <a target="_blank" href="https://www.investing.com/economic-calendar/cpi-733">forecast</a> of 2.5% and below July's 2.9% rate.But the core CPI reading rose unexpectedly to 0.3%, from 0.2% the previous month, driven by higher housing costs.The new data will factor into the Federal Open Market Committee's interest-rate decision next week, with the hot core figure decreasing the odds of a jumbo 50-basis-point cut. The CME FedWatch tool — which calculates the market's probabilities for rate cuts of specific sizes — is now assigning just a 15% likelihood to a bigger move, down from where it was after the August jobs report.Softening but still relatively strong <a target="_blank" href="https://www.businessinsider.com/unemployment-rate-job-growth-interest-rate-cuts-federal-reserve-recession-2024-9">labor market data</a> will also weigh on the Fed's decision. Data from the Bureau of Labor Statistics out last Friday showed unemployment dropped from 4.3% in July to 4.2% in August, and monthly job growth has cooled during the summer."The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market," Fed Chair Jerome Powell said in a July press conference following the FOMC policy interest rate decision. "If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September."Powell also said during that conference that "we will be data dependent but not data point dependent, so it will not be a question of responding specifically to one or two data releases."This is a developing story. Please check back for updates.

The inflation report dashes hopes of a jumbo rate cut next week

<ul class="summary-list"><li>Employment costs rose less than estimated last quarter, new data from the Labor Department shows.</li><li>The Fed often looks to the employment cost index for signs of inflation easing.</li></ul>US labor costs rose less than expected in the second quarter, giving the Fed new data to use toward a much-anticipated decision on rate cuts.New Labor Department figures showed employment costs rose by 0.9% between April and June, slowing from a 1.2% rise in the first-quarter. Economists had estimated a 1% increase, according to a Bloomberg survey.Growth in wages and salaries, a measure included in the index, eased to its slowest pace in over three years.The data is a welcome sign that inflation is easing, and could add to the Fed's confidence that inflation has slowed enough to allow for rate cuts. The Fed often uses the employment cost index as an indicator of inflation.In the past few weeks, Fed officials have consistently said they need more data on cooling inflation and a soft labor market before deciding when (and if) to cut interest rates.In a Wednesday <a target="_blank" class="" href="https://www.federalreserve.gov/monetarypolicy/files/monetary20240731a1.pdf">press release</a> ahead of the FOMC meeting, the Fed said inflation is "somewhat elevated," showing inflation has eased closer toward the Fed's 2% target."The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance," the statement said. "The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate."That language marks a shift in the Fed's focus away from focusing wholly on inflation and toward ensuring both inflation and the labor market continue to cool before cutting rates.Investors are <a target="_blank" href="https://www.businessinsider.com/interest-rate-cuts-september-not-july-inflation-federal-reserve-powell-2024-7">widely expecting a September rate cut</a>, and are eagerly awaiting any confirmation signs during Wednesday afternoon's Federal Open Market Committee meeting. Fed Chair Jerome Powell is expected to issue guidance on cuts during the meeting.Some analysts, <a target="_blank" class="" href="https://www.businessinsider.com/next-fed-interest-rate-cut-december-september-employment-inflation-bofa-2024-7">including those from Bank of America</a>, think the Fed will continue to wait for more data on slowing inflation before making a decision on rate cuts.

We just got another sign inflation is cooling

<ul class="summary-list"><li>Federal Reserve Bank of New York President John Williams said the economy is "now in equipoise."</li><li>He pointed to easing inflation and historically low unemployment, despite an uptick in recent months.</li></ul>In remarks following the August jobs report release, Federal Reserve Bank of New York President John Williams said economic conditions call for interest rate cuts.Williams pointed to easing inflation, adding in a moderated discussion that the US is seeing a historically low unemployment rate."With the economy now in equipoise and inflation on a path to two percent, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate," Williams said in a speech on Friday.Williams spoke after the highly anticipated August jobs report, which showed the unemployment rate ticked down even as fewer jobs than expected were added in August. US employers added 142,000 jobs for the month, bringing the unemployment rate down to 4.2% from 4.3%.Williams said those numbers are "consistent with what we've been seeing — a slowing economy and a cooling off in the labor market."While unemployment has risen in recent months, particularly with a surprise uptick in July, Williams said the current rate is still historically low. He forecasts the rate will end the year at about 4.25% before falling to a longer-term rate of about 3.75%.All eyes have been on the labor market following Fed Chair Jerome Powell's remarks at the central bank's Jackson Hole conference, in which he said the Fed does not welcome any further slowing of the job market. The sentiment reflects a shift in the Fed's focus on inflation and toward the labor market, which is the other side of the Fed's dual mandate."The risks to our two goals are now in better balance, and policy needs to adjust to reflect that balance," Williams said.Williams did not indicate how deep rate cuts will ultimately be, but said the time has come, echoing Powell's Jackson Hole speech."The stance of monetary policy can be moved to a more neutral setting over time depending on the evolution of the data, the outlook, and the risks to achieving our objectives," he said.

New York Fed chief says it's time to lower rates with inflation cooling and the labor market slowing

<ul class="summary-list"><li>Jamie Dimon has been warning of an economic downturn for several years.</li><li>The JP Morgan chief told CNBC this week that he still thinks a recession is the most likely outcome.</li></ul>JPMorgan chief <a target="_blank" class="" href="https://www.businessinsider.com/jamie-dimon-career#:~:text=Here's%20how%20he%20became%20an%20iconic%20billionaire%20banker.&amp;text=Jamie%20Dimon%20has%20been%20the,most%20iconic%20names%20in%20finance.">Jamie Dimon</a> is still predicting a recession.Dimon, who is one of the most respected names on Wall Street, shared his outlook on the US economy in an interview with <a target="_blank" class="" href="https://www.cnbc.com/video/2024/08/07/jpmorgan-ceo-on-inflation-getting-back-to-2-percent-im-a-little-bit-of-a-skeptic-on-that-too.html">CNBC</a> this week, saying he thinks the odds of a "soft landing" — an economic slowdown engineered by central banks to avoid a recession — are only around 35% to 40%.But his predictions aren't entirely <a target="_blank" class="" href="https://www.businessinsider.com/jamie-dimon-jpmorgan-wealth-income-inequality-economy-inflation-recession-housing-2024-4">dire</a>."I'm fairly optimistic that if we have a mild recession, even a harder one, we will be OK," Dimon told the outlet. "Of course, I'm very sympathetic to people who lose their jobs. You don't want a <a target="_blank" class="" href="https://www.businessinsider.com/jamie-dimon-inflation-soft-landing-recession-outlook-china-interest-rates-2024-5">hard landing."</a>Dimon cited <a target="_blank" class="" href="https://www.businessinsider.com/jamie-dimon-jpmorgan-inflation-consumer-spending-interest-rates-government-debt-2024-5">ongoing uncertainty</a> in several sectors that could continue to affect markets, including geopolitics, spending, and elections, all of which are likely to cause "some consternation" in the markets.Since 2022, Dimon has been warning of economic peril. In July, he told Swiss newspaper NZZ that the Fed was at <a target="_blank" class="" href="https://www.businessinsider.com/fed-rate-cuts-outlook-jamie-dimon-inflation-pressure-private-credit-2024-7">risk of moving too soon</a>, encouraging the central bank to wait on rate cuts for the time being.This week, Dimon also told CNBC that he's skeptical the Fed will reach its goal of achieving maximum employment while returning inflation to a rate of 2% over the long run.The billionaire said his skepticism is based on future market impacts, including deficit spending, a green economy, and a "remilitarization" of the world."They haven't really happened yet, but they are going to happen, and they're not deflationary," Dimon told the outlet of the potential market influences.<a target="_blank" class="" href="https://www.businessinsider.com/fed-must-cut-interest-rates-to-lower-inflation-jpmorgan-2024-4">JPMorgan economists</a> are predicting a 50-basis-point cut in September and November and 25-basis-point cuts afterward.But ultimately, Dimon said he doesn't think the <a target="_blank" class="" href="https://www.businessinsider.com/emergency-rate-cut-fed-recession-july-jobs-report-unemployment-powell-2024-8">rate effect</a> itself is all that important."Every day, 325 million Americans go to work, go to their jobs, take care of their families, take care of their kids, build out their house, change a job," Dimon said. "And is it going to be affected by the Fed changing rates by 50-basis points?""I don't think so," he added.The Fed has kept rates unchanged thus far in 2024, but a particularly disappointing jobs report last week and a shaky stock market have many experts predicting a <a target="_blank" class="" href="https://www.businessinsider.com/interest-rate-cuts-september-not-july-inflation-federal-reserve-powell-2024-7">rate cut as soon as next month.</a>

Jamie Dimon says he's skeptical inflation will hit the Fed's 2% goal

<ul class="summary-list"><li>The Fed will only cut interest rates 25 basis-points this year, Vanguard predicted.</li><li>Central bankers will be held back by high shelter costs and a strong job market, the firm said.</li></ul>The Federal Reserve is likely to cut interest rates just once this year, as housing costs are too high and the job market is still too hot, Vanguard said.The asset manager predicted the central bank would lower rates by 25 basis-points in September. That's a lot less than more ambitious rate cut scenarios see for the rest of this year, with investors expecting as many as three rate cuts by December, according to the <a target="_blank" class="" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html">CME FedWatch tool</a>.Yet, investors could end up disappointed, Vanguard said, pointing to key issues with the US economy that will make it hard for the central bank to meaningfully loosen monetary policy.The job market has cooled from the red-hot days of 2021 and 2022, but hiring trends remain strong overall. The US added <a target="_blank" href="https://www.businessinsider.com/unemployment-rate-job-growth-june-economic-data-2024-7#:~:text=The%20US%20economy%20added%20206%2C000,to%208.1%20million%20in%20May.">206,000 jobs last month</a>, which was more than expected, while wage growth dipped only slightly to 3.9%.Unemployment, meanwhile, is near historical lows. The jobless rate ticked up to 4.1% in June, but that's still close to the lowest rate since the 1960s. "The Fed is looking for a reason to cut, but it also can't ignore that cutting too soon – especially with the labor market and wage growth still strong — could risk reigniting inflation," Josh Hirt, a senior economist at Vanguard said in a <a target="_blank" class="" href="https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/rate-cuts-unlikely-until-shelter-inflation-tamed.html">note</a> earlier this month.Inflation itself remains above target, which poses another obstacle to central bankers when determining how much to loosen policy this year. <a target="_blank" href="https://www.businessinsider.com/inflation-cpi-june-prices-food-energy-fed-interest-rate-cuts-2024-7#:~:text=The%20consumer%20price%20index%20increased,%25%20month%2Dover%2Dmonth.">Consumer prices grew 3%</a> year-over-year in June, still above the Fed's 2% target.Meanwhile, core personal consumption expenditures inflation, the Fed's preferred measure of price growth, clocked in at 2.6% in June. That measure is set to rise to 2.9% by the end of the year, Vanguard predicted, though the Fed will likely want to see core PCE inflation drop below 2.5% before considering rate cuts.Inflation has been driven up, in large part, by rising shelter costs, Hirt said. <a target="_blank" class="" href="https://fred.stlouisfed.org/series/CUSR0000SAH1">Shelter costs</a> in the average US city are the highest they've ever been, and were growing at a 5% yearly pace in June, according to Federal Reserve data.Shelter inflation looks poised to "remain sticky," Vanguard said, predicting that shelter prices would continue to grow around 0.4% month-over-month."Should the Fed decide to cut interest rates in 2024, we don't foresee more than a single quarter-point cut. It faces a tricky balance between cutting rates too soon and risking resurgent inflation, and cutting too late to the economy's detriment," the firm said in its investment outlook for the <a target="_blank" class="" href="https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/investment-economic-outlook-july-2024.html">second-half</a> of the year.Other rate forecasters have trimmed their outlook for Fed easing this year after a series of hot inflation prints dashed rate-cut expectations in early 2024.Investors are watching for the Fed next policy move when central banekrs convene next week. Markets are pricing in a near-100% chance the Fed will choose to keep rates steady, the CME FedWatch tool shows.

The Fed is only going to cut rates once in 2024 as shelter inflation is too high and the job market is hot, Vanguard says 

<ul class="summary-list"><li>Economist Steve Hanke still thinks the US is on track for a recession early next year.</li><li>That's due to a recent contraction in the money supply, which preceded past downturns, he told NYSE TV Live.</li></ul>The US economy is still likely to slow into a <a target="_blank" class="" href="https://www.businessinsider.com/recession-outlook-hard-landing-economy-inflation-job-market-signal-slowdown-2024-8">recession</a> next year — and Trump's election victory may have just made the economic outlook even more challenging, according to top economist <a target="_blank" class="" href="https://www.businessinsider.com/recession-outlook-hard-landing-economy-inflation-fed-rates-steve-hanke-2024-7">Steve Hanke</a>.The Johns Hopkins professor, who's warned of a coming downturn for months, said he was sticking to his 2025 recession call in an <a target="_blank" class="" href="https://www.youtube.com/watch?v=XTxY-QAj9_Q">interview with NYSE TV Live</a> on Friday. That's mainly due to a concerning trend in the <a target="_blank" class="" href="https://www.businessinsider.com/money-supply-recession-unemployment-inflation-us-economy-outlook-jeremy-siegel-2023-12">money supply</a>, he said, referring to the total volume of money flowing around markets and the economy.M2, one class of the money supply, shrank from mid-2022 to March 2024, according to Federal Reserve data. That's a rare trend that's only happened four times over the last century, and has ended in a recession in every instance, Hanke said.The M2 money supply started to re-expand this year, rising 2.47% year-per-year at the end of September. But that rate remains well-below the 6% growth Hanke thinks is needed to maintain inflation at the Fed's target rate — a sign, in his view, that the economy is growing too slowly."My view is that the economy is going to continue to slow down and probably will experience a recession next year," Hanke said."The fuel for the economy, to make it simple, is the money supply. And what's going on in the money supply? And if you get significant changes in it, you get significant changes in nominal GDP," he later added.Trump's protectionist economic policies also impose a "big negative" for the economy, Hanke said.Economists say some aspects of Trump's agenda, like his plan to levy steep <a target="_blank" class="" href="https://www.businessinsider.com/trump-tariffs-how-shoppers-and-small-businesses-are-stocking-up-2024-11">tariffs</a> on US imports, are expected to boost <a target="_blank" class="" href="https://www.businessinsider.com/trumps-tariffs-chips-could-create-more-american-jobs-increase-prices-2024-11">economic growth</a>, something that would challenge Hanke's recession outlook. Also, the policies are seen by some as <a target="_blank" class="" href="https://www.businessinsider.com/trump-tariffs-higher-inflation-fed-interest-rates-taxes-mortgage-rates-2024-11,">inflationary</a>, which complicates the deflation piece of Hanke's argument.But, if tariffs raise costs for consumers, that could actually backfire on the US economy, Hanke said, as higher prices could lead consumers to demand fewer goods."It's very clear. If you put tariffs on imports, it's like putting a sales tax on those imports. And if you put a sales tax on something, what happens? People don't demand as much of it," he added.Trump has pushed back on the idea that his economic plan would be inflationary, and has maintained that his policies will actually lower prices for Americans. He implemented tariffs during his first term as president without a significant inflation increase, but economists note that his tariff plans this time around are far more wide-reaching, explaining the difference in inflation forecasts.Most forecasters, though, still anticipate a soft-landing for the US economy, with <a target="_blank" class="" href="https://www.businessinsider.com/inflation-october-cpi-consumer-price-index-federal-reserve-interest-rates-2024-11">inflation</a> trending closer to the Fed's target rate, while <a target="_blank" class="" href="https://www.businessinsider.com/gdp-gross-domestic-product-third-quarter-economy-2024-10">economic growth</a> has remained solid. Consumer prices rose 2.6% on a yearly basis in October, slightly hotter than last month's levels, but on par with expectations. Real <a target="_blank" class="" href="https://www.businessinsider.com/category/gdp">GDP</a>, meanwhile, is estimated to grow at a 2.5% clip over the fourth quarter, according to the Atlanta Fed's latest GDPNow reading.

Why one veteran economist is doubling down on his 2025 recession call after Trump's victory

<ul class="summary-list"><li>The market is underestimating how much the Federal Reserve's will cut rates in 2025, Goldman Sachs says.</li><li>The Fed fund rate will drop to 3.25-3.50% by the end of 2025, the bank estimates.</li></ul>Markets are underestimating how much the Federal Reserve is going to cut interest rates next year, Goldman Sachs predicted.In the bank's latest macro outlook, it estimated that the Fed funds rate could drop to 3.25%-3.5% in 2025.That's considerably below what investors see as the highest-probability outcome, as calculated by the <a target="_blank" class="" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">CME FedWatch Tool</a>. It currently sees a 30% chance of rates being in the 3.75%-4.0% range by the end of next year.The disconnect reflects the degree to which investors are wary about the potentially <a target="_blank" class="" href="https://www.businessinsider.com/inflation-october-cpi-consumer-price-index-federal-reserve-interest-rates-2024-11">inflationary effect</a> President-elect Donald Trump's policies could have. The Fed generally tackles inflation by raising interest rates, which is seen challenging the central bank's plan for further easing.But Goldman forecasts that Trump's tariffs might actually justify rate cuts by prompting an economic slowdown in the early going. In these situations, the Fed eases monetary policy to revive activity."If anything, the threat of a near-term growth drag from tariffs and the Fed leadership's continued preference for frontloaded policy normalization have strengthened our confidence in sequential cuts through early next year," Goldman analysts led by chief economist Jan Hatzius wrote on Thursday.As for reinflation concerns, Goldman assumes that Trump's tariffs will only target China and auto exports coming from Europe and Mexico. In this scenario, US core inflation would reach a "benign" level of 2.4% by late 2025.However, if the incoming president follows through on a pledge to implement across-the-board 10% tariffs on all US trade, that figure would rise to 3.1% by early 2026.Still, Goldman noted that disinflation has been ongoing globally, and is a trend that is likely to keep up."Against this backdrop, we do not expect the US election outcome to derail the policy normalization process that is currently underway, and see most major central banks easing significantly further through 2025," the note said.To be sure, Goldman acknowledged that Trump's policies remain uncertain, creating the risk of an earlier stopping point for the Fed's cutting cycle. Much of this will depend on the Fed's willingness to respond preemptively to future inflation boosts.But for now, growth risks are the Fed's key priority, Goldman noted.

You Searched For "inflation outlook" and got 9 results

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The Fed is only going to cut rates once in 2024 as shelter inflation is too high and the job market is hot, Vanguard says

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Why one veteran economist is doubling down on his 2025 recession call after Trump's victory

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