Housing, Inflation Data Support the Fed

Tepid consumer prices and weak new construction for August may validate the jumbo rate cut, but inflation comparisons could get tougher in coming months

Was the Federal Reserve correctly anticipating tepid consumer-level inflation—and weakness in new housing construction—when it cut interest rates on Sept. 18? If reports released Sept. 19 are any indication, the answer is yes. It appears weak readings on the consumer price index (CPI) and housing starts for August helped to provide cover for the Fed's bold half-point cut in the Fed funds rate target, though both of the reports left the figures pretty much right in line with expectations.

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