The highly anticipated May CPI posted earlier today shows that inflation hit a fresh 40-year high with 8.6% increase from a year earlier.  The widely followed inflation gauge rose 1.0% from a month earlier, exceeding the consensus estimate from economists calling for a gain of +0.7%.  Shelter, food, and gas were the largest contributors.  The so-called “core” CPI, which strips out the more volatile food and energy components, rose 0.6% from the prior month and 6% from a year ago, also above forecasts and long-term mortgage rates have responded accordingly. The report reinforces the notion that inflation is still running red hot, which essentially guarantees the Fed will remain committed to 50 basis point rate hikes at each of its next two meetings, starting next week.

Mortgage investors have already priced in the June rate hike but there is a growing hue and cry that 75 basis points should be the default increase with some even calling for a full 100 pt increase.  One way or another, we need to get inflation under control as the cost of the trillions of printed $$$’s that the Fed and the federal government has flushed into the economy is now fully understood.  Next week, the members of the Federal Open Market Committee will meet in Washington and Fed Chairman Powell’s post-meeting press conference will be closely dissected.  Hold tight!

Have a great weekend!

Best Regards,
Michael Dorobanti
Direct: 239.273.8374
Selling Naples and Manhattan since 1994
Top 1% of all Naples Realtors
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