Inflation Rises in January, Delaying Fed Rate Cuts and Keeping Mortgage Rates Elevated
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Inflation rose by 3.1% in January, higher than expected, suggesting the Fed may take longer to lower interest rates. This keeps mortgage rates elevated in the 6% range.
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Analysts now suggest the Fed likely won't cut rates in the first half of 2023. Rates may start falling in the second half, settling around 6% by year-end.
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The January inflation data supports the Fed taking a cautious approach to rate cuts until price trends firmly downward. The "last mile" of inflation is proving sticky.
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With elevated inflation, analysts suggest the soonest the Fed may cut rates is summer 2023 after assessing more data. Markets are aligning to potential rate cuts starting in May or June.
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As the Fed potentially cuts rates, mortgage costs may fall later in 2023, helping homebuyers see lower monthly payments.