Inflation data to show whether prices continued cooldown
(NEW YORK) — A fresh inflation report on Wednesday will show whether price increases have continued a monthslong cooldown as they fall toward normal levels.
Economists expect prices to have increased 2.6% over the year ending in August. That figure would mark a notable slowdown from the year-over-year rate of 2.9% recorded in the previous month.
After six consecutive months of slowing price increases, inflation stands at its lowest level since March 2021. However, inflation remains nearly a percentage point higher than the Federal Reserve’s target rate of 2%.
The new price data on Wednesday holds major implications for the course of widely expected interest rate cuts.
The chances of an interest rate cut at the Fed’s meeting next week are all but certain, according to the CME FedWatch Tool, a measure of market sentiment. Market observers are divided over whether the Fed will impose its typical cut of a quarter of a percentage point, or opt for a larger half-point cut.
So far this year, the job market has slowed alongside cooling inflation. That trend was underscored last week by a weaker-than-expected jobs report, though employers added a solid 142,000 jobs. The unemployment rate has ticked up this year from 3.7% to 4.2%.
The Fed is guided by a dual mandate to keep inflation under control and maximize employment. In theory, low interest rates help stimulate economic activity and boost employment, while high interest rates slow economic performance and ease inflation.
Recent trends have shifted the Fed’s focus away from controlling inflation and toward ensuring a healthy job market.
Speaking at an annual gathering in Jackson Hole, Wyoming last month, Fed Chair Jerome Powell said the “time has come” for the Fed to adjust its interest rate policy.
At previous meetings, Powell said the Fed needed to be confident that inflation had begun moving sustainably downward to its target rate of 2% before instituting rate cuts. Last month, Powell appeared to indicate that the Fed had achieved that objective.
“My confidence has grown that inflation is on a sustainable path down to 2%,” Powell said.
Since last year, the Federal Reserve has held interest rates at their highest level in more than two decades. High borrowing costs for everything from mortgages to credit card loans have helped slow the economy and lower inflation, but the policy risks tipping the U.S. into a recession.
Last month, Goldman Sachs economists raised the probability of a U.S. recession in the next year from 15% to 25%. However, economists disagree about whether current economic conditions warrant serious concern.
(NEW YORK) — The Federal Reserve delivered a jumbo-sized rate cut this week in a move widely viewed as a declaration of victory over inflation and a signal of relief for borrowers.
Few areas of the economy welcomed the news more than the nation’s sluggish housing market, where high mortgage rates have largely shut out homebuyers.
Experts who spoke to ABC News cautioned that the rate cut would not deliver an immediate drop in mortgage rates or a loosening up of the housing market.
Mortgage rates had already dropped over recent months in anticipation of the rate cut, they said. They forecasted a gradual thaw in the market as homebuyers perk up and borrowing costs slowly decline.
“This is a harbinger of good times to come, but we’re not there yet,” Susan Wachter, a professor of real estate at University of Pennsylvania’s Wharton School of Business, told ABC News.
Here’s what to know about what the Fed’s rate cut means for mortgage rates and the housing market.
What does the Fed’s rate cut mean for mortgage rates?
The interest rate cut likely will not have a significant impact on mortgage rates over the short term, experts said. That’s because mortgage rates had already moved due to an expectation of this rate decision.
The average interest rate for a 30-year fixed mortgage stands at 6.09%, according to Freddie Mac data released on Thursday.
That figure has plummeted more than a percentage point since May. The average interest rate for a 30-year mortgage has dropped even further from a peak reached last October.
“Everybody has been talking about an expected drop in the Fed Funds rate,” Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, told ABC News. “The mortgage market heard that loud and clear.”
Initial evidence suggesting unchanged mortgage rates can be found in the yield on a 10-year Treasury bond, experts said.
Mortgage rates closely track the yield on a 10-year Treasury bond, or the amount paid to a bondholder annually. In the aftermath of the Fed’s rate cut on Wednesday, the yield on a 10-year Treasury bond ticked slightly upward, defying the nudge downward by the central bank.
“Ten-year rates are basically pricing in the effect of interest rates coming down,” Lu Liu, a professor at the Wharton School at the University of Pennsylvania, told ABC News.
Still, experts added, mortgage rates may gradually decline over the remainder of 2024 and the duration of 2025.
The Federal Open Market Committee, a policymaking body at the Fed, on Wednesday forecasted further interest rate cuts.
By the end of 2024, interest rates will fall nearly another half of a percentage point from their current level of between 4.75% and 5%, according to FOMC projections. Interest rates will drop another percentage point over the course of 2025, the projections indicated.
If interest rates track those projections, then mortgage rates may see some decline as investors gain confidence that falling interest rates will not hit a snag, experts said.
“By the end of 2025, we can expect mortgage rates to be in the 5% range,” Wachter said.
Lautz offered a slightly less optimistic assessment, predicting mortgage rates next year in the high 5% range.
Uncertainty about the path of mortgage rates remains significant, said Liu. “It’s always a little bit of wait and see,” Liu said.
Experts agreed, however, that mortgage rates would not return to levels of between 2% and 3% enjoyed by homebuyers as recently as 2021. Those rates came in response to aggressive rate cuts at the Fed in response to COVID-19.
“That was a very unusual environment,” Lautz said. “It’s very unlikely to happen.”
What does the Fed’s rate cut mean for the housing market?
Experts expect the housing market to eventually heat up. But they do not expect the interest rate cut to deliver a sudden jolt.
The housing market remains sluggish. Existing-home sales declined 2.5% in August compared to the previous month, according to a report released by the National Association of Realtors on Thursday. The slowdown took place despite a significant decline in mortgage rates over that period.
The housing market will loosen up as low mortgage rates trickle through to homebuyers, and as those consumers proceed through the monthslong process of purchasing a home, experts said. The lower mortgage rates will also entice prospective buyers who previously balked at higher borrowing costs, they added.
Still, the current drop in mortgage rates may not rekindle the housing market, experts said, citing a phenomenon known as the “lock-in effect.”
While mortgage rates have fallen, they remain well above the rates enjoyed by most current homeowners, who may be reluctant to put their homes on the market and risk a much higher rate on their next mortgage.
In turn, the market could continue to suffer from a lack of supply, making options limited and prices sticky. Over the coming months, however, the housing market could loosen up, experts said.
“Now with rates coming down, we may gradually see some people willing to give up lower rates, move and sell their houses,” Liu said. “Hopefully there will be a little more supply on the market, but prices aren’t likely to come down all that much.”
Lautz agreed, predicting better days ahead. “It’s a slow burn,” she said. “We should see a change in activity and more buyers able to afford the market.”
(WASHINGTON) — When Kamala Harris ran for president in 2020, she released 15 years of her personal tax returns, the most of any 2020 presidential candidate. The disclosure offers a glimpse into how Harris, who has emerged as the front-runner for the Democratic presidential nomination after President Joe Biden’s sudden withdrawal from the race, became a millionaire as a public servant.
After Harris, in 2014, married Doug Emhoff, who was then an entertainment lawyer, her net worth increased significantly due to the couple’s combined assets, a review of her tax records and financial disclosures shows.
Before then, Harris’ income came mostly from her public salaries as district attorney of San Francisco and attorney general of California.
Before she was married, the highest annual income reported by Harris was in 2010, when she reported earning $263,000. The next year, when she became attorney general, her reported income dropped to less than $160,000 a year in 2011, 2012 and 2013.
After marrying Emhoff — whose clients have included retail giant Walmart and health care company Abbott Labs, as well as a Malibu real estate agent who found fame on The Real Housewives of Beverly Hills — Harris’ income went up significantly.
As a high-profile attorney for one of the world’s largest companies, Emhoff earned more than $1 million per year and held dozens of investments and stocks, according to financial documents reviewed by ABC News.
In 2014, Emhoff owned shares of at least 30 stocks from companies including Home Depot, St. Jude Medical, Comcast, and American Express, according to his statement of economic interest, a form required for California employees.
After Harris announced she would run for U.S. Senate in 2015, Emhoff sold off many of his stocks, including CVS Health and Oracle. Harris won her Senate seat in 2016.
From 2015 until 2019, Emhoff reported dozens of publicly traded investments known as “excepted investment funds,” according to annual reports filed by Harris when she was a senator.
As Harris’ profile grew, so did her earnings. According to a 2018 annual report filed by Harris, she received an advance of more than $300,000 for her memoir, The Truths We Hold, and she and Emhoff reported a gross joint income of $1,889,156 that year, according to tax returns.
Before Harris assumed the vice presidency in 2021, Emhoff announced in December 2020 that he would leave his law firm. He joined Georgetown University’s law school as a member of faculty, where he has earned nearly $200,000 per year.
As a result of the move, the couple’s income dropped significantly, from more than $3 million in 2019 to about $450,000 in 2023.
Nevertheless, with their real estate assets and pension, Forbes estimates Harris and Emhoff’s net worth to be about $8 million, up from $7 million in 2021. Property records reviewed by ABC News show Harris sold her Washington, D.C., condo in 2021 for $1.85 million, and the couple currently owns a house in Brentwood, California, that Emhoff purchased in 2012 for $2.7 million.
If Harris becomes the Democratic presidential nominee, she will face former President Donald Trump, who has long fought to keep his tax records private.
Forbes, in its most recent accounting, estimates Trump’s net worth to be $5.9 billion, which an earlier breakdown said consists of $2.5 billion mainly from his real estate properties, clubs and resorts, plus the value of his share of Truth Social’s parent company, minus the $540 million in legal liabilities from his civil trials over the last year.
(NEW YORK) — McDonald’s is extending its popular $5 meal deal as the value meal battle between fast food chains wages on.
In a company memo obtained by ABC News, McDonald’s executives said most U.S. locations will extend the deal through August.
The deal that first launched on June 25 was only supposed to stay on menus for a month, but executives said the deal has resonated with millions of customers and has helped boost traffic at restaurants.
The meal combo includes a choice of a McDouble or McChicken sandwich, small french fries, four-piece chicken nuggets and a small soft drink.
Several other fast food chains including Burger King, Wendy’s, Starbucks and Taco Bell have rolled out comparable discounts this summer to entice customers voicing frustrations over fast food high prices.
Wendy’s upped the ante on Monday, announcing a new mobile app exclusive where customers can get the Honey Buddy — its Honey Butter Chicken Biscuit breakfast sandwich — for just $1 every Monday through the end of September with any purchase.
According to the Bureau of Labor Statistics Consumer Price Index, the cost of going out to eat has outpaced the cost of groceries each month this year.