Unsurprisingly, shelter costs remain one of the highest overall contributors to inflation, accounting for almost 40% of price growth despite slowing between October and November.
CPI for all items rises 0.3% in November; shelter and food up https://t.co/dJyJeKmvth #CPI #BLSdata
— BLS-Labor Statistics (@BLS_gov) December 11, 2024
But First American senior economist Sam Williamson noted that the cooldown – which saw shelter inflation slide to 0.2% last month, compared with monthly averages of around 0.4% during the past year – marked the lowest level of shelter inflation since January 2021.
While a flurry of big rate cuts is unlikely in 2025, he said they would still likely be significant enough to lead mortgage rates steadily downwards in the coming 12 months.
“This much-needed progress is likely welcome news for the Fed, which has faced setbacks in its inflation-fighting efforts recently,” Williamson wrote. “Assuming a more gradual pace of rate cuts in 2025, mortgage rates are generally expected to follow a similar path, likely settling in the mid-to-low 6% range by year-end.”
American Staffing Association chief economist Noah Yosif told Bloomberg that cutting rates would “allow the Fed to be nimble enough to tackle potential disinflationary headwinds in the new year, including continued stickiness within shelter costs, as well as policy shifts on tariffs, taxes, as well as immigration.”