Prices recorded sharp jump in U.S. real estate and stabilizes

The U.S. inflation accelerated to the fastest pace since early 2013 and the housing market is stabilizing, reflecting the recovery in the country is saying after weak start to the year.

The Labor Department reported that consumer prices rose 0.4% in May, the biggest gain since February last year. The figure was above expectations of 0.2%.

The rise was driven by food prices, which rose 0.5%, the biggest increase since August 2011 and the fifth consecutive monthly rise.

In annual terms, the CPI 2.1%, increased the biggest jump since October 2012, after having climbed 2% of the previous month. This was the first consecutive advance 2% since early 2012.

The so-called core CPI, which does not consider the prices of food and energy, grew 0.3%, the highest variation in nearly three years. In the twelve months to May this index increased 2%, the biggest gain in fifteen months.

The rise in inflationary pressures should ease the members of the Federal Reserve who had expressed concern that the rate was well below the target of 2%.

“Inflation in the U.S. is in a nice place, not too hot and not too cold,” he told Bloomberg Mulraine Millan, deputy head of research and strategy at TD Securities USA. “The disinflationary stress we’ve had in the last two or three years is over.”

In any case, the price index of personal consumption expenditures-the measurement of inflation preferred by the issuing entity-is still below target.

back to normal

Yesterday housing data, which showed a stabilization after cooling in boreal winter is also met.

The Commerce Department reported that initial construction totaled 1 million units last month, in line with analyst estimates. Thus, for the second consecutive month this measurement exceeded 1 million barrier after the rate of 1.07 million in April.

Construction of single-family homes fell 5.9% from 664,000 to 625,000 units, while multifamily properties work as condominiums and apartments, fell 7.6% to 376 thousand.

Three of the four regions of the nation experienced a fall in this category, led by a contraction of 25.2% in the Northeast. The exception was the South, which posted a 7.3% increase in the initial construction.

Meanwhile, building permits, which serve as a barometer for future construction, fell 6.4% to an annualized pace of 991,000. Experts cast down from 1059000-1050000.

The decline was due to the collapse of 19.5% to 372,000 units in multifamily applications. Single-family projects, which represent the majority of the market, expanded 3.7% to 619,000, its highest level since November. “The real estate industry is well,” he told Bloomberg Brian Jones, senior U.S. economist at Societe Generale. “Demand is improving,” he said.

Fed would raise rates sooner than the market believes

The Fed will probably begin to raise interest rates before they consider investors, according to a Bloomberg survey.

55% of experts believe that Eurodollar futures, the contract interest rate in the short term more actively traded in the world, are underestimating the pace of monetary tightening.

Conrad DeQuadros, senior economist at RDQ Economics, said that investors in these contracts are assuming slower than the Fed hikes rates speed.

The options on these contracts show a 47% probability that the benchmark rate, currently between zero and 0.25% is 0.75% or less by the end of 2015. The end of 2016, the probability of it being 2% or lower is 54%.
Three months ago, members of the central bank predicted that rates would rise to 1% by the end of next year and 2.25% in two and half years.

The Federal Open Market Committee today published an update of its economic projections after its monetary policy meeting.

Meanwhile, 54% of respondents said that political analysts or most important communication Fed action this year will brighten your exit strategy. Strategy that allows the bank balance is reduced as assets mature was adopted in 2011. Then the Fed would raise rates then gradually sell assets, focusing on mortgage-backed securities.

But a year ago the strategy began to change when former central banker Ben Bernanke said that the majority of staff supported not sell the real estate debt portfolio. Instead, assets gradually decline as the bonds mature.

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