Last week’s financial reporting was dominated by readings on inflation. Weekly reports on mortgage rates and jobless claims were also released and Treasury Secretary Janet Yellen cautioned lawmakers that the debt ceiling must be raised or eliminated.
Inflation slows in December
Month-to-month inflation slowed by -0.1 percent in December and matched analysts’ expectations. This was the first slowing of inflation since the pandemic and the highest inflation reading since inflation reached its highest level in 40 years. Inflation rose by 0.1 percent in November. Year-over-year inflation rose by 6.5 percent, which matched expectations, and fell short of the November reading of 7.1 percent inflation.
Consumer prices fell for the sixth consecutive month in December. Core inflation, which excludes volatile food and fuel sectors, rose by 0.3 percent in December and matched analysts’ expectations. Slowing inflation is expected, but the Federal Reserve has signaled its intention to continue raising its target interest rate range.
The University of Michigan projected that inflation will rise by 4.00 percent year-over-year in January as compared to December’s reading of 4.4 percent and the 40-year peak rate of 9.1 percent posted last summer.
Treasury Secretary: U.S. debt limit is looming
Treasury Secretary Janet Yellen announced that the U.S. debt ceiling is approaching and encouraged lawmakers to either raise or eliminate the debt ceiling to avoid the U.S. defaulting on its obligations. Ms. Yellen wrote in a letter to U.S. lawmakers, “While Treasury is not currently able to estimate how long extraordinary measures will enable us to continue to pay the government’s obligations, it’s unlikely that cash and extraordinary measures would be exhausted before early June.”
Ms. Yellen emphasized that increasing or removing the debt ceiling would not result in additional spending, but would allow the government to continue financing existing obligations made by lawmakers and Presidents of both parties. Secretary Yellen cautioned that failure to address the debt ceiling would “cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.”
Mortgage Rates, Jobless Claims
Freddie Mac reported lower mortgage rates last week as the average rate for 30-year fixed-rate mortgages fell by 15 basis points to 6.33 percent. The average rate for 15-year fixed-rate mortgages fell by 21 basis points to 5.52 percent.
205,000 new jobless claims were filed last week, which fell short of projections for 210,000 initial claims filed and the previous week’s reading of 206,000 first-time claims filed. 1.63 million continuing jobless claims were filed as compared to the previous week’s reading of 1.70 million ongoing claims filed.
What’s Ahead
This week’s scheduled economic reports include readings from the National Association of Home Builders on housing markets, readings on housing starts, and building permits issued.
Inflation dominated last week’s economic readings and predictions as it hit a year-over-year growth rate of 9.10 percent in July. Inflation reached its highest year-over-year growth rate since 1981. Gasoline prices eased somewhat, but not enough to provide relief against a backdrop of high housing and food prices. Low and moderate-income consumers were disproportionately impacted as rents rose beyond near-record inflation and home prices remained out of reach for many would-be home buyers.