This material includes forward-looking statements subject to risks and uncertainties; actual results may differ.
Inflation Eases Slightly, Fed Likely Remains Patient
April inflation came in slightly softer than expected, with the headline Personal Consumption Expenditures Index (PCE) rising 0.4% for the month and 3.8% year-over-year, while core inflation increased 0.2% monthly and 3.3% annually. The data suggests inflation pressures may be moderating, but prices remain well above the Federal Reserve’s 2% target, making near-term rate cuts unlikely. Economic growth slowed more than expected in the first quarter, though consumer spending remained resilient, supported in part by a declining personal savings rate. Markets continue to expect the Fed to keep rates unchanged for the foreseeable future as policymakers balance persistent inflation against signs of a cooling economy.
Rising Energy Costs Squeeze Consumers
The Iran war has added an estimated $447 in extra energy-related expenses per U.S. household since late February, driven primarily by sharply higher gasoline, diesel, and airline fuel costs. These increased expenses have more than offset the average benefit from larger tax refunds this year, reducing consumers’ discretionary spending power. While consumer spending remained positive in April, flat income growth and a personal savings rate near post-financial-crisis lows suggest households are relying more heavily on savings and credit to maintain spending. Economists warn that if elevated energy prices persist, consumer spending could weaken further, posing an additional risk to an already slowing economy.
Higher Mortgage Rates Slow Housing Demand
Mortgage rates rose for the fifth consecutive week, pushing the average 30-year fixed rate to 6.65%, its highest level since August 2025, and weighing on overall mortgage activity. Total mortgage applications fell 8.5%, led by an 18% decline in refinance demand as fewer homeowners could benefit from refinancing at current rates. Home purchase applications were relatively stable, slipping just 0.4% from the prior week and remaining 5% above year-ago levels. Higher borrowing costs are also reducing affordability, with the average purchase loan amount reaching a record $473,600 as smaller-balance borrowers become increasingly priced out of the market.
As always, Base Wealth Management remains focused on aligning investment strategies with your long-term goals amid evolving market conditions.
