Prices Stabilize in November
The personal consumption expenditures (PCE) price index rose just 0.1% in November and 2.4% annually, slightly above the Federal Reserve’s 2% target. Core PCE, excluding food and energy, also increased 0.1% for the month and 2.8% annually, with both readings coming in below forecasts. While goods prices showed little change, services rose 0.2%, and housing inflation appeared to cool slightly, rising just 0.2%. The Federal Reserve acknowledged progress toward its inflation goals but emphasized caution in future rate adjustments, with Chair Jerome Powell likening the approach to navigating uncertainty in “a foggy night.”
Fed Cuts Rates, Lowers Guidance for 2025
The Federal Reserve lowered its key interest rate by 0.25 percentage points to 4.25%-4.5%, marking the third consecutive cut as it recalibrates policy amidst persistent inflation and solid economic growth. Despite projecting 2.5% GDP growth for 2024, the Fed anticipates a gradual economic slowdown and slightly higher inflation than its 2% goal, prompting a cautious outlook on further rate cuts. Chair Jerome Powell emphasized the importance of a slower approach, signaling only two potential rate reductions in 2025 and stressing the need for careful assessments of fiscal policy impacts. Market reactions were sharp, with stocks falling and Treasury yields rising, reflecting skepticism about the Fed’s ability to sustain rate cuts.
Home Sales Surge in November
Sales of homes rose 4.8% in November compared to October, reaching an annualized rate of 4.15 million units, the third-highest pace this year and the largest annual gain in three years. The uptick reflects stronger market momentum due to job growth, increased housing inventory, and buyer adaptation to mortgage rates between 6% and 7%. Tight supply continued to drive prices higher, with the median price rising 4.7% year-over-year to $406,100, while high-end home sales surged and entry-level sales declined. First-time buyers represented 30% of sales, a slight improvement from October, but investors pulled back sharply as rising mortgage rates and slower rent growth impacted their activity.
