Despite positive headline numbers, inflation continues to be driven by rising shelter costs, with rents and equivalent homeowner costs increasing notably. High mortgage rates are keeping the housing market stagnant, even as the Federal Reserve eyes a 2% inflation target before changing interest rates. Although inflation has not surged as some economists feared following new tariffs instituted by President Trump, concerns about the accuracy of inflation data have risen due to federal hiring freezes leading to underreporting. Unemployment remains steady, suggesting an unresponsive labor market amidst these economic shifts.
Inflation is primarily driven by shelter costs, with housing expenses rising significantly, while the job market remains stable despite a slight decline in job creation.
The Federal Reserve aims for a 2% inflation rate before cutting interest rates, with cooling inflation offering hope, but a softening labor market is still anticipated.
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