Intelligent Investment

Economic Watch: Inflation Continues to Ease; November Rate Increase Unlikely

October 12, 2023 2 Minute Read

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Executive Summary

  • The Consumer Price Index (CPI) rose by 0.4% in September and 3.7% year-over-year, slightly more than respective consensus estimates of 0.3% and 3.6%. However, the monthly increase was down from the 0.6% jump in August, while the year-over-year rate was unchanged.
  • Headline inflation was largely driven by shelter costs, which made up more than half of the monthly increase and were 7.2% higher than a year ago. Gasoline and fuel oil prices also were big contributors, up by 2.1% and 8.5%, respectively, for the month.
  • Core inflation, which excludes volatile food and energy prices, rose by 0.3% month-over-month and 4.1% from a year ago, both in line with consensus estimates.
  • CBRE forecasts that real estate investment activity will remain subdued through first half of 2024. However, the leasing market will retain some of its current momentum due to the economy’s continued resilience.

The Bottom Line

CBRE expects that the Fed will hold rates steady in November as inflation continues to trend down and tighter financial conditions persist. However, the possibility of another rate hike in December is not completely off the table. Furthermore, we expect the economy to soften late this year, which will further limit price pressures.

Commercial real estate investment activity is unlikely to improve until capital sources are confident that interest rates have stabilized, likely in the first half of 2024. We do not expect a material increase in investment volumes until the second half of 2024. By contrast, the leasing market will retain some of its current momentum due to a relatively resilient economy.

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