Weekly Market Recap: Inflation Surprises, Rate Cut Uncertainty, and Tariff Worries
CPI data shakes up market expectations, while investors watch the Fed and global trade policy unfold.
What Happened Last Week
Inflation Heats Up, Rate Cut Hopes Cool Off – January CPI came in hotter than expected, with core CPI up 0.4% MoM (vs. 0.2% prior) and 3.3% YoY, pushing Treasuries higher and sending rate cut expectations plummeting.
Treasury Yields Spike – The 10-year UST jumped to 4.62% (+20 bps WoW), while the 2-year climbed to 4.35% (+16 bps WoW). The market is now only pricing in one Fed rate cut this year, with just a 25% chance of a second by December—down from 80% last week.
Fed Signals Patience – Powell told Congress the Fed is not in a hurry to cut rates, emphasizing strong economic conditions and a resilient labor market. He also acknowledged concerns that Trump’s proposed reciprocal tariffs could stoke inflation.
Retail Sales Drop Hard – U.S. retail sales fell 0.9% in January, the steepest decline in nearly two years, raising concerns about consumer spending momentum.
Brookfield Sees CRE Improving – Brookfield reported improving fundamentals in commercial real estate, with sentiment shifting positively despite high interest rates.
Market Movers to Watch This Week
Tuesday, Feb. 17th:
Home Builder Confidence: Will rising rates dampen builder sentiment?
Wednesday, Feb 18th:
Housing Starts & Building Permits: Key indicators for multifamily supply pipelines.
Thursday, Feb 19th:
Jobless Claims & Leading Economic Indicators: Fresh labor market data and economic health insights.
Friday, Feb 29th:
S&P Services PMI & Existing Home Sales: A pulse check on consumer demand and the housing market.
Macro & Multifamily Takeaways
Tariffs & Construction Costs: Trump’s proposed reciprocal tariffs could push construction costs higher, complicating development pro formas and potentially keeping pressure on supply pipelines.
Rents on the Rise: With new construction slowing, multifamily rent growth is expected to pick up—but demand will need to stay strong to absorb lingering supply in Sun Belt markets.
CRE’s "Extend-and-Pretend" Continues: Loan modifications hit a record $19B in 2024, showing that lenders are still avoiding forced sales while waiting for rates to come down.
Who predicted this? Hmm… Expect more of this throughout the year.
Final Thoughts
Markets are juggling mixed signals: inflation isn’t cooling as expected, rate cut probabilities are slipping, and new trade policies could add fresh uncertainty. But with NMHC behind us, investors will be watching transaction volume closely to see if deal momentum picks up.
What’s your take—are rate cuts still on the table this year, or is the market getting ahead of itself? Drop a comment below.
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