Federal Reserve Governor Christopher Waller said he sees interest rate increases continuing through the rest of the year as part of an effort to bring inflation under control. Specifically, the central bank official said he would support hikes that exceed the “neutral” level which would be restrictive for growth of the US economy. Estimates Fed officials provided in March point to a 2.5% neutral level, so that means Waller sees rates increasing at least another 2 percentage points from here.
The University of Michigan’s gauge of consumer sentiment fell to a final May reading of 58.5 from the initial reading of 59 earlier in the month, its lowest level in more than 10 years. Americans’ expectations for overall inflation over the next year fell to 5.3% in May from 5.4% in April, while expectations for inflation over the next 5 years remained at 3%. High inflation remains at the top of consumers minds, though data indicate that price pressures may be easing somewhat, aided by small declines in gas prices. A key measure of U.S. inflation released Friday showed prices for a typical basket of consumer goods rising 6.3% year-over-year in April, down from a 40-year high of 6.6% in March.
Rising mortgage rates did not slow down rising home prices in March. Nationally, home prices were 20.6% higher than they were in March 2021, according to the S&P CoreLogic Case-Shiller Home Price Index. That is higher than the 20% gain in February.