Investors’ hopes of rate cuts are waning as problems in the US housing market look set to keep house price and rental inflation bubbling along.
Already a subscriber?Investors’ hopes for rate cuts this year have been quashed with the latest batch of US economic data providing further evidence that US inflation remains stubbornly high, even as US economic activity is showing signs of slowing.Action in futures markets shows that investors are relinquishing hope that the US Federal Reserve will cut interest rates this year. Markets now put the chances of a rate cut in September at 59.
Signs that inflation is much more recalcitrant than expected is putting upward pressure on bond yields. The yield on benchmark US 10-year bonds climbed to 4.7 per cent, the highest level since early November. They point out that US inflation tumbled from a peak of 9.1 per cent in mid-2022 as pandemic-era bottlenecks were unblocked which meant that goods prices began to climb much more slowly, or even to fall.
As a result, sales of existing homes have plunged, with 2023 witnessing the lowest level in three decades.
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