Intelligent Investment
Economic Watch: Lower September Inflation Keeps Fed on Track to Cut Rates
October 10, 2024 3 Minute Read
Executive Summary
- The Consumer Price Index (CPI) rose by 2.4% year-over-year in September, slightly above expectations of 2.3% but down from 2.5% in August.
- Core inflation, which excludes food and energy prices, increased to 3.3%, also slightly above expectations of 3.2%.
- There were notable monthly increases in food, auto insurance and airfares. Energy prices fell by 1.9% and shelter inflation rose more modestly than in the prior two months.
- September’s inflation reading supports our expectation that the Fed will cut interest rates by 25 bps in both November and December.
- Lower interest rates should boost commercial real estate investment activity in coming quarters, although bond market volatility remains a headwind.
The Bottom Line
Although we expect more rate cuts this year and next, labor market conditions will influence how quickly the Fed eases monetary policy. Despite persistent service sector inflation, we expect price increases will moderate toward the Fed’s 2% target in 2025.
As the Fed continues its rate cutting cycle, we expect that Treasury yields will support commercial real estate investment activity. Investment volume this year likely will exceed 2023’s level and further accelerate in 2025.
Figure 1: CBRE House View
