Macro Matters: 'Several higher inflation prints' needed for a Fed hike

Hinzugefügt: 2026-05-31

[00:00:00]US inflation comes in hot, increasing pressure on the Fed.

[00:00:06]>> [music] >> This is Macro Matters and we're talking inflation. The Fed's most watched measure of prices, the PCE index, increased at its fastest pace in 3 years in April and several Federal Reserve policymakers have said they're not convinced the inflationary shock is transitory. Higher energy might not be the only factor pushing prices higher, Austan Goolsbee said this week. Things like soaring prices for memory chips and the power demand from data centers are also playing a role. Odeta Kushi is deputy chief economist at First American. Odeta, what have we learned from today's data?

[00:00:37]>> Well, I don't think that today's data materially changes the Fed's stance. We know that inflation is at the highest rate since 2023, but the month-over-month growth came in a little bit softer than expected.

[00:00:52]But even with that, it's still materially above where the Fed wants it to be at 2% and so I I still think that today's data keeps the Fed in a wait-and-see stance. Now, textbook monetary policy will tell us that the Fed should look through oil price shocks, but I think that the more sustained uh the shock, the more likely that the Fed turns hawkish.

[00:01:14]>> How widespread are these price pressures now though, beyond the energy sector?

[00:01:17]>> Well, we do see that core uh consumer prices, so that's removing the impact of energy and food, that remained higher than where the Fed wants it to be. So, in this month's report, it was 3.3% the highest since fall 2023. So, that gives us some indication that energy uh is is the impact is broadening outside of just the energy sector.

[00:01:40]>> So, even President Trump now seems to be accepting that a rate cut's not coming anytime soon. He said this week that new chair Kevin Warsh should do what he feels is necessary. But where is the bar do you think for the Fed to seriously be thinking about a hike?

[00:01:52]>> I think that we would need to see several more prints of higher inflation, sustained inflation, Uh that that would need to be the case for the Fed to consider hiking. I still think at this next meeting, we'll still be in a hold, wait-and-see stance as of today. They'll they'll need to see several more reports.

[00:02:09]>> What does all this mean for America's borrowers?

[00:02:11]>> I think it means higher for longer interest rates at the moment. When we look at the US housing market, we can see that the US Treasury is back up, mortgage rates are above 6 and 1/2%.

[00:02:21]As as we sit in the crucial spring home-buying season, those mortgage rates have moved higher since the beginning of the year. Affordability is still better in the real estate sector than it was a year ago, but with with higher mortgage rates, we do see that the the pressure is starting to increase.

[00:02:39]>> Are you expecting to see more movement in the housing market than than we did last year, or are people going to keep waiting to move in the hope that rates come down?

[00:02:47]>> We could see some buyers move off the sidelines. After all, the decision to buy and sell a home is not strictly financial, it's also lifestyle driven.

[00:02:54]We've had several years of pent-up demand in the housing market, and we do know that inventory conditions have improved since year-ago levels. So, I I do expect some movement in the housing market, but I I do think that higher mortgage rates certainly blunts the momentum in this year's spring home-buying season.

[00:03:12]>> That was Odeta Kushi of First American.

[00:03:14]Don't forget, you can watch more videos on reuters.com.

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