February 18

2/18 - One big worry for economists trying to handicap Trump Administration initiatives is how tariffs, deportations, and potential tax cuts will affect consumer prices and overall inflation. Last week, the Consumer Price Index for January was reported up 3.0% from a year ago. Food away from home (+3.4%) and shelter (+4.4) were two of the larger year-over-year increases (again). Utility (piped) gas service is 4.9% above a year ago. The CPI, which peaked at 9.1% in June 2022, before dropping to a recent low of 2.4% in Oct 2024, has now increased for 3 straight months. The Fed – like everyone else - is in wait-and-see mode. They may hold steady or even raise rates if inflation heads higher. Conversely, they could lower rates if unemployment rises and GDP growth falters. For now, 10-year treasury yields at 4.5% and 30-year fixed rate mortgages at 6.87% (national average) look to remain relatively high in 2025.