INFLATION STILL TAME: The U.S. Federal Reserve Bank has set its inflation target at 2%. It works hard to keep the U.S. far away from deflation, and it does not want runaway inflation. To the Fed, Goldilocks territory is 2%. The Consumer Price Index (CPI) gained 0.3% in April. If you take out the more volatile food and energy prices, the so-called “core CPI” gained just 0.1%. For the year, CPI is up 2.0% (core CPI up 2.1%). These numbers must be making the Fed happy, and certainly less likely to do anything with interest rates for the foreseeable future.
REVERSAL: Stock markets gave back some of their recent gains last week. All major U.S. stock indices remain in double digit positive territory for the year. This week’s reversal was likely caused by a variety of factors:
- North Korea test fired new rockets and the U.S. Navy impounded a North Korean freighter.
- The U.S. hiked tariff rates on Chinese Goods from 10% to 25%.
- There has been no progress on a U.K. Brexit deal with the European Union.
- The U.S. Navy sent a carrier group to the Middle East to pressure Iran.
MORTGAGES AND HOMES: For the week ending May 11, the average rate for a 30-year mortgage dipped from 4.14% to 4.10%. In January, this figure was 4.55%. For a fifteen-year mortgage, the average fell to 3.57%. Both refinancing and purchasing of homes has picked up. Refinancing had been coming down since the middle of 2016, but has begun to rise again this year. According to the Mortgage Bankers’ Association, purchasing activity is up 5% from one year ago.
GROWING STUDENT LOAN DEBT: In 2006, the total amount of outstanding student loan debt was $480 billion. Today, that amount has more than tripled to $1.53 trillion. According to the National Association of Realtors (NAR), 83% of people aged 22-35 who have not purchased a home blame their student debt. The average amount of student loan debt for a New Hampshire resident with such debt is $36,367, the highest in the nation. The lowest average in the nation is Utah with $20,000. Again according to data compiled by the NAR, 45 million Americans are carrying some student loan debt with one fifth of those holding $100,000 or more.
GROWING STUDENT LOAN DEBT: https://www.statista.com/chart/15235/outstanding-student-loans-in-the-us/
INFLATION STILL TAME: https://www.calculatedriskblog.com/2019/05/cleveland-fed-key-measures-show.html; https://www.clevelandfed.org/en/our-research/indicators-and-data/median-cpi/current-components.aspx; https://www.usinflationcalculator.com/inflation/current-inflation-rates/; https://www.marketwatch.com/story/higher-gas-prices-rents-boost-inflation-in-april-cpi-shows-2019-05-10
MORTGAGES AND HOMES: http://www.leimberg.com/finance/; https://www.calculatedriskblog.com/2019/05/mba-mortgage-applications-decreased-in_8.html