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Money Update, 19 July: Inflation Cools, Mortgage Rates Climb, Consumers Feel Better (For Now)

elinorr
Elinor Rozenvasser Updated: August 3, 2023 • 2 min read
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Table of Content
US Economy

Last week was a big one for economic data, and the news was mixed. On the one hand, inflation finally seems to be cooling off. The Consumer Price Index (CPI) slowed from 4% to 3% in June, the lowest level since March 2021. And the Producer Price Index (PPI), which measures inflation at the wholesale level, also cooled in June.

Here's what happened:

  1. Inflation is cooling off, but it's still too early to say whether it's over.
  2. Mortgage rates are rising, which could put a damper on the housing market.
  3. Consumer sentiment is improving, but it's still not back to pre-pandemic levels.

Good news on inflation is good news indeed, but it's really too early to declare victory on inflation.

What Last Week's Data Says About the State of the US Economy

Fed officials are not yet ready to declare victory on inflation. They are taking the recent data with a grain of salt, noting that it is still too early to say whether the trend will continue. "There is no doubt that the good news on inflation is good news indeed, but it's really too early to declare victory on inflation", said San Francisco Federal Reserve Bank President Mary Daly.

They also point out that some prices, such as those for services, are still rising at a rapid pace. Mortgage rates are still on the rise. The average 30-year fixed mortgage rate inched up to 6.96% in the week ending July 13, according to Freddie Mac. And while higher mortgage rates typically lead to lower home prices, that hasn't happened yet.

Here's what it means:

  • The Fed may be able to achieve a soft landing, but it's not guaranteed.
  • Home prices could start to decline, but it's too early to say for sure.
  • Consumers are feeling better, but they're still not spending as much as they were before the pandemic.

Consumer sentiment is also on the rise. The University of Michigan's Consumer Sentiment Index jumped to its highest level since September 2021 in July. But even though consumers are feeling better, they're still not as optimistic as they were before the pandemic.

 

Here's what to do:

  • If you're thinking about buying a home, be prepared for higher mortgage rates. Compare the top mortgage lenders to land the lowest mortgage rates.
  • If you're on a tight budget, be mindful of rising prices.
  • If you're feeling optimistic about the economy, don't be afraid to spend.

Bottom Line:

The economy is in a state of flux right now. Inflation is cooling off, but it's still too early to say whether it's over. Mortgage rates are rising, which could put a damper on the housing market. And consumer sentiment is improving, but it's still not back to pre-pandemic levels.

It's a confusing time for the economy, but it's important to stay informed and make informed financial decisions.

elinorr
Written by Elinor Rozenvasser

Elinor Rozenvasser is a content writer and editor with a knack for finance. She holds a Bachelor's in Communications and Business from Reichman University, and has been swimming alongside finance specialists for over a decade. She's not your typical financial writer, though. She's more likely to use witty puns and sarcasm than jargon and technical terms. But don't let that fool you. She's still a whiz when it comes to explaining complex financial concepts in a way that anyone can understand. If there's any writer who can make finance fun and engaging, Elinor is your girl. She's sure to leave you laughing (and learning) long after you've finished reading her work.