REALTOR® Magazine-Daily News-Lower Energy Prices May End Inflation Scare

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Daily Real Estate News | November 17, 2006 | Lower Energy Prices May End Inflation Scare
Inflation took a breather last month. The Labor Department reports that consumer prices fell a seasonally adjusted 0.5 percent last month, matching September’s decline. Overall, prices have risen 1.3 percent year-over-year, the smallest increase since June 2002.

Gas prices fell 11.1 percent from September, and were down 18.3 percent from a year earlier. Natural-gas prices fell 7.7 percent and were down 24 percent below a year ago.

Some housing-related costs, including rents paid by tenants as well as what the Fed calls owner’s equivalent rent, which compares to mortgage costs, each rose 0.4 percent from September.

Many say these declines mean the inflation scare is over. If current trends continue, Mark Vitner, a senior economist at Wachovia Corp., predicts the Fed's next move will likely be to cut interest rates in the first half of 2007. Immediately after the report, futures markets raised the odds of a quarter-point rate cut by April to about one in four, from about one in seven.

Source: The Wall Street Journal, Rafael Gerena-Morales (11/17/2006)