Fed, Trump and Inflation
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Fed, Trump and Jerome Powell
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If you're thinking about tapping your home's equity, make sure you understand what could happen with rates soon.
Rising prices across an array of goods from coffee to audio equipment to home furnishings pulled inflation higher in June in what economists see as evidence of the Trump administration's increasing import taxes passing through to consumers.
Former Treasury Secretary Lawrence Summers warned that President Donald Trump’s preference for the Federal Reserve’s interest-rate setting would trigger a surge in expectations for inflation, driving up long-term borrowing costs.
With the Federal Reserve's July meeting on the horizon, many prospective homebuyers and homeowners are wondering what it could mean for mortgage rates. After years of relatively high borrowing costs, even the slightest dip could open doors for those hoping to buy or refinance. But the path forward is far from clear.
The inflation gauge the Federal Reserve relies on most to decide whether to raise or lower U.S. interest rates is likely to cement a decision by the central bank to stand pat at its next meeting at the end of July.
What is clear is that the current 4.33% median Fed funds target rate remains well above the inflation trend. Even after the acceleration in consumer prices in June, the policy rate is roughly 1.4 percentage points above headline CPI’s one-year change – close to the biggest gap post-pandemic.
The Bureau of Labor Statistics reported that the consumer price index (CPI), a popular inflation gauge, increased in June to 2.7% on an annual basis as prices rose for consumers.
Some investors had clung to a bit of hope that the Federal Reserve would cut interest rates at its next meeting on July 30. Tuesday's report on inflation brought the chances of that down even further.
The report on wholesale inflation came a day after the Labor Department reported that consumer prices last month rose 2.7% from June 2024, the biggest year-over-year gain since February, as Trump’s sweeping tariffs pushed up the cost of everything from groceries to appliances.