What to Expect From This Week's Upcoming Inflation Report

Economists expect that the Federal Reserve's preferred measure of inflation will once again show an increase, which could create a conundrum for central bank officials as they try to chart the path ahead for interest rates.

The Personal Consumption Expenditure (PCE) Index report released Friday is expected to show a 0.4% price increase for February, according to a survey of economists conducted by Dow Jones Newswires and The Wall Street Journal.1

 It would be the second consecutive month that consumer prices increased, making it more difficult for Federal Reserve officials to write it off as a temporary setback in their fight against inflation.

"The takeaway from the March meeting of the Federal Open Market Committee [FOMC] is that policymakers aren't ignoring recent inflation data but aren't panicking," wrote Oxford Economics' Nancy Vanden Houten. "The Fed clearly wants to see more inflation data before cutting."

Read more about the upcoming report here.

Investors See ‘No Landing’ Scenario in 2024, Willing to Tolerate Inflation

With the stock market flying high, some see the potential for the economy to have “no landing” and continue to run hot despite inflation’s persistent price pressures. A Deutsche Bank Research survey released this week found 45% believe the U.S. economy will be in a “no landing” scenario at the end of 2024. In that case, the economy would continue growing and avoid entering a recession, but inflation would remain above the 2% target.

One potential factor could be the acceptance of inflation, with nearly half of respondents saying central banks like the Federal Reserve should tolerate inflation higher than the 2% target for a longer period, while a tenth said the target should be raised. 

“They feel comfortable with this perhaps because their five-year inflation expectations continue to edge down,” said the report from Deutsche Bank researchers Jim Reid and Cassidy Ainsworth-Grace. 

-Terry Lane

Mortgage Applications Dip Again Despite Declining Rates

The volume of mortgage applications dipped again last week, despite interest rates on home loans moving lower, data from the Mortgage Bankers Association (MBA) showed Wednesday.

Mortgage applications for the week ending March 22 were lower by 0.7% from the prior week. It's the second straight week mortgage applications declined, as potential homebuyers weren’t drawn in by a drop in the 30-year fixed mortgage rate to 6.93%.

Loan applications for home purchases and refinancing were lower, with the Purchase Index coming in 16% lower than the same week from a year ago.

“Homebuyers continue to hold out for lower mortgage rates and for more listings to hit the market,” said Joel Kan, MBA vice president and deputy chief economist. “Lower rates should help to free up additional inventory as the lock-in effect is reduced, but we expect that will only take place gradually, as we forecast that rates will move toward 6% by the end of the year.”

-Terry Lane