Still hoping for rate cuts? Beat inflation first.

When will mortgage rates drop? Will prices ever cool down?

In February, the Core PCE Price Index — the Fed’s preferred inflation gauge — rose 2.8% year-over-year and 0.4% month-over-month, both above expectations. Inflation pressures remain.

Surprisingly, even as personal income jumped 0.8%, consumer spending only rose 0.4%, and the savings rate hit 4.6% — the highest since June 2024. People are earning more but spending less.

This cautious behavior signals weak consumer momentum, which may delay the Fed’s rate-cut plans.

Inflation is proving sticky

Prices for services rose 0.4%, housing costs increased 0.3%. With inflation still high, interest rates may stay elevated, keeping borrowing expensive for homes, cars, and businesses.

Markets and the Fed on hold

After the report, markets pulled back slightly. The Fed is likely to remain cautious, especially with Trump’s new tariff threats. If tariffs go into effect, import prices could rise again, adding more inflation pressure and pushing rate cuts further out.