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Tag: Inflation

  • Fed’s favored inflation gauge shows cooling price pressures, clearing way for more rate cuts

    Fed’s favored inflation gauge shows cooling price pressures, clearing way for more rate cuts

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    WASHINGTON (AP) — The Federal Reserve’s preferred inflation measure on Friday provided the latest sign that price pressures are easing, a trend that is expected to fuel further Fed interest rate cuts this year and next.

    Prices rose just 0.1% from July to August, the Commerce Department said, down from the previous month’s 0.2% increase. Compared with a year earlier, inflation fell to 2.2%, down from 2.5% in July and barely above the Fed’s 2% inflation target.

    The cooling of inflation might be eroding former President Donald Trump’s polling advantage on the economy. In a survey last week by The Associated Press-NORC Center for Public Affairs Research, respondents were nearly equally split on whether Trump or Vice President Kamala Harris would do a better job on the economy. That is a significant shift from when President Joe Biden was still in the race, when about six in 10 Americans disapproved of his handling of the economy. The shift suggests that Harris could be shedding some of Biden’s baggage on the economy as sentiment among consumers begins to brighten.

    Grocery costs barely rose last month, according to Friday’s report, and energy costs dropped 0.8%, led by cheaper gasoline.

    Excluding volatile food and energy costs, so-called core prices rose just 0.1% from July to August, also down from the previous month’s 0.2% increase. It was the fourth straight time that monthly price increases have fallen below an annual rate of 2%, the Fed’s target. Compared with 12 months earlier, core prices rose 2.7% in August, slightly higher than in July.

    “Sticky inflation is yesterday’s problem,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said in a research note.

    With inflation having tumbled from its 2022 peak to barely above the Fed’s 2% target, the central bank last week cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of high rates. The policymakers also signaled that they expect to reduce their key rate by an additional half-point in November and in December. And they envision four more rate cuts in 2025 and two in 2026.

    The ongoing decline in inflation makes it even more likely that the Fed will cut its key benchmark rate further in the coming months.

    On Thursday, Tom Barkin, president of the Federal Reserve Bank of Richmond, expressed support for a cautious approach to rate cuts. In an interview with The Associated Press, he said he favors reducing the Fed’s key rate “somewhat.” But Barkin said he wants to ensure that inflation keeps cooling before cutting the benchmark rate to a level that would no longer restrain the economy.

    Friday’s report also showed that Americans’ incomes and spending ticked up only slightly last month, with both rising just 0.2%. Still, those tepid increases coincide with upward revisions this week for income and spending figures from last year. Those revisions showed that consumers were in better financial shape, on average, than had been previously reported.

    Americans also saved more of their incomes in recent months, according to the revisions, leaving the savings rate at 4.8% in September, after previous figures had shown it falling below 3%.

    The government reported Thursday that the economy expanded at a healthy 3% annual pace in the April-June quarter. And it said economic growth was higher than it had previously estimated for most of the 2018-through-2023 period.

    The Fed tends to favor the inflation gauge that the government issued Friday — the personal consumption expenditures price index — over the better-known consumer price index. The PCE index tries to account for changes in how people shop when inflation jumps. It can capture, for example, when consumers switch from pricier national brands to cheaper store brands.

    In general, the PCE index tends to show a lower inflation rate than CPI. In part, that’s because rents, which have been high, carry double the weight in the CPI that they do in the index released Friday.

    Recent reports suggest that the economy is still expanding at a healthy pace. On Thursday, the government confirmed its previous estimate that the U.S. economy grew at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment.

    Several individual barometers of the economy have been reassuring as well. Last week, the number of Americans applying for unemployment benefits fell to its lowest level in four months.

    And last month, Americans increased their spending at retailers, suggesting that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and high borrowing rates.

    The nation’s industrial production rebounded, too. The pace of single-family-home construction rose sharply from the pace a year earlier. And this month, consumer sentiment rose for a third straight month, according to preliminary figures from the University of Michigan. The brighter outlook was driven by “more favorable prices as perceived by consumers” for cars, appliances, furniture and other long-lasting goods.

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  • Making sense of the markets this week: September 29, 2024 – MoneySense

    Making sense of the markets this week: September 29, 2024 – MoneySense

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    The Chinese government commands the economy to grow

    Many people like to sort countries’ economies as either communist, socialist, capitalist or free markets. But these days, every country has some version of a mixed economy. The practical implementation of fiscal and monetary policy is becoming increasingly more grey than our old black-and-white economics textbooks would have us believe. Yet, even within the grey, China’s approach for its economic system is uniquely difficult to define.

    Back in 1962, when asked about building a socialist market economy, future China leader Deng Xiaoping famously said, “It doesn’t matter whether the cat is black or white, so long as it catches mice.”

    Well, the current China leaders have let the fiscal and monetary cats out of the bag, and they’re hoping those cats are hungry.

    We wrote about China’s housing problems about a year ago, warning about rising deflation fears. These issues seem to have gotten worse, and the biggest news in world markets this week was that China’s government decided enough was enough. And in a “command” economy (which is probably the most accurate way to describe its approach), the government has a very high degree of control over economic levers. Consequently, markets reacted swiftly and positively to this news. 

    Here are the highlights of the multi-pronged fiscal and monetary stimulus that the Chinese government has decided to implement:

    • Banks cut the amount of cash they need in reserve (this is known as the reservation requirement ratio) by 0.50%. This will incentivize banks to lend more money (basically “creating” 1 trillion yuan, USD$142 billion).
    • The People’s Bank of China (PBOC) Governor Pan Gongsheng said another cut may come later in 2024.
    • Interest rates for mortgages and minimum down payments on homes were cut.
    • A USD$71 billion fund was created for buying Chinese stocks.

    That last point is pretty interesting to me. Here you have a supposedly communist government essentially creating a big pot of money to spend within a free stock market. The fund is to directly purchase stocks, as well as providing cash to Chinese companies to execute stock buybacks. Good luck defining that action in traditional economic terms. 

    The idea is to give investors and consumers faith that they should go out there and buy or invest in China’s expanding economy. Clearly something major had to be done to jolt Chinese consumers out of their malaise.

    Source: FinancialTimes.com

    Early reports are speculating that the Chinese gross domestic product (GDP) could fail to rise by less than the 5% target set by the government. If so, we’re about to see what happens when the commander(s) behind a command economy decide that the GDP will rise no matter what.

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    Kyle Prevost

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  • Deloitte Canada predicts more economic growth, benchmark rate below 3% in 2025 – MoneySense

    Deloitte Canada predicts more economic growth, benchmark rate below 3% in 2025 – MoneySense

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    In the company’s fall economic outlook released Thursday, it forecasts the central bank’s interest rate will fall to 3.75% by the end of this year and a neutral rate of 2.75% by mid next year. 

    Meanwhile, it expects the economy to grow moderately as softer labour market conditions persist, especially as many home owners have yet to face higher rates when they refinance their loans.  

    “We do think that we’re going to be in for a decent year next year,” said Dawn Desjardins, chief economist at Deloitte Canada. 

    It appears Canada will successfully skirt a recession despite the impact of higher borrowing costs on the economy, said Desjardins. 

    “It’s hard to argue that the economy is just skating through this period of higher interest rates. But having said that, the overall numbers themselves continue to show the economy is expanding,” she said. 

    “Yes, the labour market has softened, but I don’t think we’re in any kind of crisis in the labour market at this time.”

    Higher interest rates impacting economic growth, labour market

    The Bank of Canada has cut its benchmark rate three times so far this year as inflation has eased, and signalled more cuts are coming. 

    Inflation in Canada hit the central bank’s 2% target in August, falling from 2.5 in July to reach its lowest level since February 2021. 

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    The Canadian Press

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  • US economy grew at a solid 3% rate last quarter, government says in final estimate

    US economy grew at a solid 3% rate last quarter, government says in final estimate

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    WASHINGTON — The American economy expanded at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment, the government said Thursday, leaving its previous estimate unchanged.

    The Commerce Department reported that the nation’s gross domestic product — the nation’s total output of goods and services — picked up sharply in the second quarter from the tepid 1.6% annual rate in the first three months of the year.

    Consumer spending, the primary driver of the economy, grew last quarter at a 2.8% pace, down slightly from the 2.9% rate the government had previously estimated. Business investment was also solid: It increased at a vigorous 8.3% annual pace last quarter, led by a 9.8% rise in investment in equipment.

    The third and final GDP estimate for the April-June quarter included figures showing that inflation continues to ease, to just above the Federal Reserve’s 2% target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3.4% in the first quarter of the year. Excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.8% pace, down from 3.7% from January through March.

    The U.S. economy, the world’s biggest, displayed remarkable resilience in the face of the 11 interest rate hikes the Fed carried out in 2022 and 2023 to fight the worst bout of inflation in four decades. Since peaking at 9.1% in mid-2022, annual inflation as measured by the consumer price index has tumbled to 2.5%.

    Despite the surge in borrowing rates, the economy kept growing and employers kept hiring. Still, the job market has shown signs of weakness in recent months. From June through August, America’s employers added an average of just 116,000 jobs a month, the lowest three-month average since mid-2020, when the COVID pandemic had paralyzed the economy. The unemployment rate has ticked up from a half-century low 3.4% last year to 4.2%, still relatively low.

    Last week, responding to the steady drop in inflation and growing evidence of a more sluggish job market, the Fed cut its benchmark interest rate by an unusually large half-point. The rate cut, the Fed’s first in more than four years, reflected its new focus on shoring up the job market now that inflation has largely been tamed.

    “The economy is in pretty good shape,’’ Bill Adams, chief economist at Comerica Bank, wrote in a commentary.

    “After a big rate cut in September and considerable further cuts expected by early 2025, interest-rate-sensitive sectors like housing, manufacturing, auto sales, and retailing of other big-ticket consumer goods should pick up over the next year. Lower rates will fuel a recovery of job growth and likely stabilize the unemployment rate around its current level in 2025.’’

    Several barometers of the economy still look healthy. Americans last month increased their spending at retailers, for example, suggesting that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and high borrowing rates. The nation’s industrial production rebounded. The pace of single-family-home construction rose sharply from the pace a year earlier.

    And this month, consumer sentiment rose for a third straight month, according to preliminary figures from the University of Michigan. The brighter outlook was driven by “more favorable prices as perceived by consumers” for cars, appliances, furniture and other long-lasting goods.

    A category within GDP that measures the economy’s underlying strength rose at a solid 2.7% annual rate, though that was down from 2.9% in the first quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.

    Though the Fed now believes inflation is largely defeated, many Americans remain upset with still-high prices for groceries, gas, rent and other necessities. Former President Donald Trump blames the Biden-Harris administration for sparking an inflationary surge. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers even further.

    On Thursday, the Commerce Department also issued revisions to previous GDP estimates. From 2018 through 2023, growth was mostly higher — an average annual rate of 2.3%, up from a previously reported 2.1% — largely because of upward revisions to consumer spending. The revisions showed that GDP grew 2.9% last year, up from the 2.5% previously reported.

    Thursday’s report was the government’s third and final estimate of GDP growth for the April-June quarter. It will release its initial estimate of July-September GDP growth on Oct. 30. A forecasting tool from the Federal Reserve Bank of Atlanta projects that the economy will have expanded at a 2.9% annual pace from July through September.

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    This story has been corrected to show that PCE inflation rose at a 3.4% annual rate in the first quarter, not 3%.

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  • Department of Justice sues Visa, alleges the card issuer monopolizes debit card markets

    Department of Justice sues Visa, alleges the card issuer monopolizes debit card markets

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    NEW YORK — The U.S. Justice Department has filed an antitrust lawsuit against Visa, alleging that the financial services behemoth uses its size and dominance to stifle competition in the debit card market, costing consumers and businesses billions of dollars.

    The complaint filed Tuesday says Visa penalizes merchants and banks who don’t use Visa’s own payment processing technology to process debit transactions, even though alternatives exist. Visa earns an incremental fee from every transaction processed on its network.

    According to the DOJ’s complaint, 60% of debit transactions in the United States run on Visa’s debit network, allowing it to charge over $7 billion in fees each year for processing those transactions.

    “We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” said Attorney General Merrick B. Garland in a statement. “Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service. As a result, Visa’s unlawful conduct affects not just the price of one thing – but the price of nearly everything.”

    The Biden administration has aggressively gone after U.S. companies that it says act like middlemen, such as Ticketmaster parent Live Nation and the real estate software company RealPage, accusing them of burdening Americans with nonsensical fees and anticompetitive behavior. The administration has also brought charges of monopolistic behavior against technology giants such as Apple and Google.

    According to the DOJ complaint, filed in the U.S. District Court for the Southern District of New York, Visa leverages the vast number of transactions on its network to impose volume commitments on merchants and their banks, as well as on financial institutions that issue debit cards. That makes it difficult for merchants to use alternatives, such as lower-cost or smaller payment processors, instead of Visa’s payment processing technology, without incurring what DOJ described as “disloyalty penalties” from Visa.

    The DOJ said Visa also stifled competition by paying to enter into partnership agreements with potential competitors.

    In 2020, the DOJ sued to block the company’s $5.3 billion purchase of financial technology startup Plaid, calling it a monopolistic takeover of a potential competitor to Visa’s ubiquitous payments network. That acquisition was eventually later called off.

    Visa previously disclosed the Justice Department was investigating the company in 2021, saying in a regulatory filing it was cooperating with a DOJ investigation into its debit practices.

    Since the pandemic, more consumers globally have been shopping online for goods and services, which has translated into more revenue for Visa in the form of fees. Even traditionally cash-heavy businesses like bars, barbers and coffee shops have started accepting credit or debit cards as a form of payment, often via smartphones.

    KBW analyst Sanjay Sahrani said in a note to investors that he estimates that U.S. debit revenue is likely at most about 10% of Visa revenue.

    “Some subset of that may be lost if there is a financial impact,” he said. Visa’s “U.S. consumer payments business is the slowest growing piece of the aggregate business, and to the extent its contribution is affected, it is likely to have a very limited impact on revenue growth.”

    He added the lawsuit could stretch out for years if it isn’t settled and goes to trial.

    Visa processed $3.325 trillion in transactions on its network during the quarter ended June 30, up 7.4% from a year earlier. U.S. payments grew by 5.1%, which is faster than U.S. economic growth.

    Visa, based in San Francisco, did not immediately have a comment. Visa shares fell $13.53, or 4.7%, to $275.10 in afternoon trading.

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  • Olive Garden’s sales are dropping as customers cut back. Now, it’s revamping its menu.

    Olive Garden’s sales are dropping as customers cut back. Now, it’s revamping its menu.

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    Olive Garden’s menu of pastas and endless breadsticks failed to keep customers coming back this summer, with sales wilting at the Italian-restaurant chain. Now, the company plans to bring back some dishes it discontinued during the pandemic to convince diners to return. 

    The chain is bringing back its steak gorgonzola alfredo and stuffed chicken marsala, two dishes that it stopped serving during the pandemic, according to Ricardo Cardenas, the CEO of Olive Garden parent company Darden Restaurants. It’s also expanding its Never Ending Pasta Bowl offer by adding a new sauce — garlic herb — as an option.

    Cardenas, who spoke during a September 19 earnings call, said the returning dishes will give “guests another reason to visit in the back half of this fiscal year.”

    Olive Garden blamed its sales slump on “the sales softness that impacted the industry in July,” according to Darden Chief Financial Officer Raj Vennam on the call. Several restaurant chains have reported struggling to attract inflation-weary customers this year, especially as restaurant prices have surged 28% since January 2020, prior to the pandemic, prompting some to roll out savings promotions, such as McDonald’s $5 value meal.

    “We always want to give our guests more of what they love when they come to Olive Garden, which is why we’re bringing back our Steak Gorgonzola Alfredo and Stuffed Chicken Marsala later in our fiscal year,” said Olive Garden spokeswoman Brittany Baron in an email to CBS MoneyWatch. 

    The company has also seen a rebound in the first three weeks of September, she added. 

    Olive Garden’s same-restaurant sales dropped 2.9% in its fiscal first quarter, which ended August 25. Darden CFO Vennam noted the company was “surprised by the significant step down in traffic beginning with the 4th of July holiday,” but also added that sales picked up in August. 

    Olive Garden’s new menu additions

    The Italian chain added the garlic herb sauce as of September 23, Baron said. She added that the $13.99 price of the Never Ending Pasta Bowl hasn’t changed since 2022.

    The company had discontinued the steak gorgonzola alfredo and stuffed chicken marsala dishes during the pandemic because it “streamlined our menus to help simplify operations and ensure the highest level of execution for our guests,” she added. 

    Darden CEO Cardenas said bringing back the two dishes will help the restaurant add more protein-based main courses.

    “Both have been recast with higher-quality ingredients and easier execution for their restaurant teams,” Cardenas said on the conference call. “This announcement received tremendous applause from their general managers at their GM Conference in August.”

    Darden last week also announced that Olive Garden is teaming up with Uber to offer third-party delivery service for the first time. Individual orders will be picked up and delivered by Uber Direct, a premium delivery service. Olive Garden won’t be listed on the broader Uber Eats platform.

    If the initial pilot is successful, the delivery option will expand nationwide by May 2025, Darden said at the time.

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  • Making sense of the markets this week: September 22, 2024 – MoneySense

    Making sense of the markets this week: September 22, 2024 – MoneySense

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    U.S. Fed cuts rates for the first time in four years

    The U.S. dollar remains the most important currency in the world, and the American economy is arguably the most important financial system as well. Consequently, when the U.S. Federal Reserve makes a big announcement, it creates an economic wave that ripples everywhere. That’s why Wednesday’s decision to cut the key overnight borrowing rate by 0.50% is a very big deal.

    Many speculated the U.S. Fed would begin cutting rates this week, but it was generally thought it would go with a 0.25% drop to begin an interest rate-cut cycle. The 50 basis points cut lowers the federal funds rate range 4.75% to 5%.

    Source: CNBC

    The U.S. Fed announced in a statement: “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

    Federal Reserve Chair Jerome Powell said, “We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with this inflation. That’s what we’re trying to do, and I think you could take today’s action as a sign of our strong commitment to achieve that goal.”

    Immediately after the news of the U.S.’s first interest rate cuts in four years, major stock market indices responded with a brief jump on Wednesday. But they ended the day nearly flat. That seemed to be a bit of a delayed reaction from investors, as the Bulls returned Thursday with Nasdaq soaring 2.5% and the Dow leaping 1.3% to pass 42,000 for the first time ever.

    Notably, former U.S. President Donald J. Trump continued to criticize the monetary decisions made by the U.S. Federal Reserve. This despite centuries of financial wisdom telling us that politicians getting involved in short-term monetary policy is a bad idea. (See: Turkey – Erdoğan, Tayyip.) At bitcoin bar PubKey on Wednesday, Trump said, “The economy would be very bad, or they’re playing politics.”

    The larger-than-expected rate cut left some commentators questioning if this action would spook the markets. But, if the U.S. Fed manages to thread the needle and cut rates without a recession, it could be a good thing. The historical precedents are very positive for shareholders. 

    Source: EdwardJones.ca

    This large rate cut helps ease pressures on emerging markets that borrowed in U.S. dollars. And, it takes some of the pressure off other central banks around the world that didn’t want to see their currencies devalued too much relative to the mighty USD.

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    Kyle Prevost

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  • Stock market today: Wall Street romps toward records as jubilation sweeps markets worldwide

    Stock market today: Wall Street romps toward records as jubilation sweeps markets worldwide

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    NEW YORK — Wall Street is romping toward records Thursday as a delayed jubilation sweeps markets worldwide following the Federal Reserve’s big cut to interest rates.

    The S&P 500 was up by 1.9% in late trading and above its all-time closing high set in July. The Dow Jones Industrial Average was up 580 points, or 1.4%, and on track to top its record set on Monday. The Nasdaq composite was 2.8% higher with an hour left in trading.

    The rally was widespread, and the company behind Olive Garden and Ruth’s Chris, Darden Restaurants, helped lead the way with a jump of 7.8%. It said sales trends have been improving since a sharp step down in July, and it announced a delivery partnership with Uber.

    Nvidia, meanwhile, barreled 4.6% higher and was once again the strongest force lifting the S&P 500. Lower interest rates weaken criticism by a bit that its shares and those of other influential Big Tech companies look too expensive following the frenzy around artificial-intelligence technology.

    Wall Street’s gains followed rallies for markets across Europe and Asia after the Federal Reserve delivered the first cut to interest rates in more than four years late on Wednesday.

    It was a momentous move, closing the door on a run where the Fed kept its main interest rate at a two-decade high in hopes of slowing the U.S. economy enough to stamp out high inflation. Now that inflation has come down from its peak two summers ago, Chair Jerome Powell said the Fed can focus more on keeping the job market solid and the economy out of a recession.

    Wall Street’s initial reaction to Wednesday’s cut was a yawn, after markets had already run up for months on expectations for coming reductions to rates. Stocks ended up edging lower after swinging a few times.

    “Yet we come in today and have a reversal of the reversal,” said Jonathan Krinsky, chief market technician at BTIG. He said he did not anticipate such a big jump for stocks on Thursday.

    Some analysts said the market could be relieved that the Fed’s Powell was able to thread the needle in his press conference and suggest the deeper-than-usual cut was just a “recalibration” of policy and not an urgent move it had to take to prevent a recession.

    That bolstered hopes that the Federal Reserve can successfully walk its tightrope and get inflation down to its 2% target without a recession. So too did a couple reports on the economy released Thursday. One showed fewer workers applied for unemployment benefits last week, another signal that layoffs across the country remain low.

    The pressure is nevertheless still on the Fed because the job market and hiring have begun to slow under the weight of higher interest rates. Some critics say the central bank waited too long to cut rates and may have damaged the economy.

    Powell, though, said Fed officials are not in “a rush to get this done” and would make decisions on policy at each successive meeting depending on what the incoming data says.

    Some investment banks raised their forecasts for how much the Federal Reserve will ultimately cut interest rates, anticipating even deeper reductions than Fed officials. Forecasts released Wednesday show Fed officials expect to cut interest rates by potentially another half of a percentage point in 2024 and another full point in 2025. The federal funds rate is currently sitting in a range of 4.75% to 5%.

    Lower interest rates help financial markets in two big ways. They ease the brakes off the economy by making it easier for U.S. households and businesses to borrow money, which can accelerate spending and investment. They also give a boost to prices of all kinds of investments, from gold to bonds to cryptocurrencies. Bitcoin rose above $63,500 Thursday, up from about $27,000 a year ago.

    An adage suggests investors should not “fight the Fed” and instead ride the rising tide when the central bank is cutting interest rates. Wall Street was certainly doing that Thursday. But this economic cycle has continued to break conventional wisdoms after the COVID-19 pandemic created an instant recession that gave way to the worst inflation in generations.

    Wall Street is worried that inflation could remain tougher to fully subdue than in the past. And while lower rates can help goose the economy, they can also give inflation more fuel.

    The upcoming U.S. presidential election could also keep uncertainty reigning in the market. A fear is that both the Democrats and Republicans could push for policies that add to the U.S. government’s debt, which could keep upward pressure on interest rates regardless of the Fed’s moves.

    History may also offer few clues about how things may progress given how unusual the conditions are. This looks to have higher expectations for rate cuts than past easing cycles, according to strategists at Bank of America.

    The economic conditions of this cycle one may resemble 1995 a bit, but unfortunately “no great analogs exist,” the strategists led by Alex Cohen wrote in a BofA Global Research report.

    In the bond market, the yield on the 10-year Treasury edged up to 3.73% from 3.71% late Wednesday. The two-year Treasury yield, which more closely tracks expectations for Fed action, fell to 3.60% from 3.63%.

    In stock markets aboard, indexes jumped even more across the Atlantic and Pacific oceans. They rose 2.3% in France, 2.1% in Japan and 2% in Hong Kong.

    The FTSE 100 climbed 0.9% in London after the Bank of England kept interest rates there on hold. The next big move for a central bank arrives Friday, when the Bank of Japan will announce its latest decision on interest rates.

    ___

    AP Business Writers Matt Ott and Elaine Kurtenbach contributed.

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  • Trump says inflation has cost households $28,000 under Biden and Harris. Is that true?

    Trump says inflation has cost households $28,000 under Biden and Harris. Is that true?

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    Former President Donald Trump regularly criticizes President Biden and Vice President Kamala Harris over what inflation is costing families, citing one figure in particular. 

    At a Las Vegas rally on Sept. 13, Trump blamed Harris for causing “the worst inflation in American history, costing us and the typical family $28,000.” He also highlighted the $28,000 figure at recent rallies in Wisconsin, Pennsylvania and Arizona.

    Under President Biden, year-over-year inflation — or the pace of price increases — peaked at 9.1% in June 2022, the highest monthly figure in about 40 years, but it has since cooled considerably. In August, inflation hit a three-year low of 2.5%. 

    Lower inflation means the rate of price increases has slowed, but not that prices themselves have decreased. CBS News’ price tracker shows the cost of everyday household expenses remain higher compared to pre-pandemic levels.

    Economists told CBS News that Trump’s $28,000 figure is largely correct. Citing the figure on its own, however, ignores the crucial context that inflation led to income growth, not just price hikes. Data indicates that over the last three and a half years, many Americans have seen a net positive increase in their finances.

    Where the $28,000 figure comes from

    The estimate that inflation has cost the typical American household $28,000 since Mr. Biden took office is consistent with an inflation tracker from Republicans on Congress’ Joint Economic Committee. 

    The tracker is based on government data from the Bureau of Economic Analysis of state-level personal consumption expenditures — one measure of spending on goods and services. 

    The study tracked monthly costs for the average American household in each state since January 2021. From that point through July 2024, the average cumulative increase in household costs among all 50 states and Washington, D.C., was $27,950, due to inflation. In an update for August 2024, the increase rose to around $29,000.

    Economists told CBS News the estimate for the total increase in household costs in the last three and a half years is likely in the correct range. Experts generally agree that household costs have increased since January 2021, although the precise number differs depending on the specific metrics used.  

    Comparing price increases under Trump and Biden

    The Republicans on the Joint Economic Committee told CBS News they did not do a similar analysis of how household costs changed under Trump’s administration.

    Government data shows prices also grew under Trump, but by much less. The Consumer Price Index for all items increased by around 8% over Trump’s four years in office. By comparison, the total increase in consumer prices thus far under Biden is around 20%. 

    Of course, the two faced markedly different economic circumstances during their time in the White House. 

    While Trump’s administration enjoyed low inflation and healthy job growth for much of his time in office, the pandemic leveled the economy toward the end of his term. Early in the Biden administration, inflation reached modern highs as the economy recovered from employment and global supply chain disruptions resulting from the COVID-19 pandemic. Many other countries around the world also saw high inflation due to the pandemic — in some cases far higher than the U.S.

    The Federal Reserve believes keeping inflation at a low, stable rate of around 2% year-over-year is best for a well functioning economy where people and businesses can plan financially. It’s typical for prices to grow throughout a presidential term. A reduction in prices, or deflation, is generally not thought of as desirable by economists, and price increases are considered a feature of a healthy economy. 

    How incomes have fared under Biden

    Economists say price increases should be compared to income increases to fully understand how inflation is affecting people’s finances.

    Mark Zandi of the independent Moody’s Analytics told CBS News that due to inflation, the median American household spent $905 more in August 2024 to purchase the same goods and services than they did in August 2021. However, the median household made $1,073 more in August 2024 than it did three years ago.

    Cumulatively, the Democrats on the Joint Economic Committee told CBS News that their calculations show the average family earned $35,390 in additional wages and salaries between the start of Mr. Biden’s term and July 2024 — a figure that’s more than $7,000 greater than the total increase in household costs over that time period estimated by the committee’s Republicans.

    As of last year, Americans’ incomes had rebounded to pre-pandemic levels. According to the most recent data from the U.S. Census, in 2023, median household income rose a healthy 4%, to $80,610, on par with earnings in 2019 on an inflation-adjusted basis. 

    Another way to measure the financial health of Americans is to look at government data on real disposable personal income, which reflects after-tax income adjusted for inflation. This income figure includes not only wages and salaries but also income from investments and government subsidies. 

    Disposable personal income has been higher on average during Mr. Biden’s term than it was in December 2020, Trump’s last full month in office. According to Gary Burtless, an economist and senior fellow at the Brookings Institution, real disposable personal income per person has been above $49,407 — where it was in December 2020 — for 30 of the 43 months of Mr. Biden’s term so far.

    “Given that Americans’ actual real incomes have increased over the course of the Biden administration, it’s a little hard to see the basis for claiming that ‘inflation under Biden has cost the typical U.S. family $28,000,’” Burtless said.

    Laura Doan

    Laura Doan is a fact checker for CBS News Confirmed. She covers misinformation, AI and social media.

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  • Video: Federal Reserve Cuts Interest Rates for the First Time in Four Years

    Video: Federal Reserve Cuts Interest Rates for the First Time in Four Years

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    Federal Reserve Cuts Interest Rates for the First Time in Four Years

    Jerome H. Powell, the Fed chair, said that the central bank would take future interest rate cuts “meeting by meeting” after lowering rates by a half percentage point, an unusually large move.

    Today, the Federal Open Market Committee decided to reduce the degree of policy restraint by lowering our policy interest rate by a half percentage point. Our patient approach over the past year has paid dividends. Inflation is now much closer to our objective, and we have gained greater confidence that inflation is moving sustainably toward 2 percent. We’re going to take it meeting by meeting. As I mentioned, there’s no sense that the committee feels it’s in a rush to do this. We made a good, strong start to this, and that’s really, frankly, a sign of our confidence — confidence that inflation is coming down.

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  • The Federal Reserve just cut interest rates by a half point. Here’s what that means for your wallet

    The Federal Reserve just cut interest rates by a half point. Here’s what that means for your wallet

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    People shop at a grocery store on August 14, 2024 in New York City. 

    Spencer Platt | Getty Images

    The Federal Reserve announced Wednesday it will lower its benchmark rate by a half percentage point, or 50 basis points, paving the way for relief from the high borrowing costs that have hit consumers particularly hard. 

    The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

    Wednesday’s cut sets the federal funds rate at a range of 4.75%-5%.

    A series of interest rate hikes starting in March 2022 took the central bank’s benchmark to its highest in more than 22 years, which caused most consumer borrowing costs to skyrocket — and put many households under pressure.

    Now, with inflation backing down, “there are reasons to be optimistic,” said Greg McBride, chief financial analyst at Bankrate.com.

    However, “one rate cut isn’t a panacea for borrowers grappling with high financing costs and has a minimal impact on the overall household budget,” he said. “What will be more significant is the cumulative effect of a series of interest rate cuts over time.”

    More from Personal Finance:
    The ‘vibecession’ is ending as the economy nails a soft landing
    ‘Recession pop’ is in: How music hits on economic trends
    More Americans are struggling even as inflation cools

    “There are always winners and losers when there is a change in interest rates,” said Stephen Foerster, professor of finance at Ivey Business School in London, Ontario. “In general, lower rates favor borrowers and hurt lenders and savers.”

    “It really depends on whether you are a borrower or saver or whether you currently have locked-in borrowing or savings rates,” he said.

    From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how a Fed rate cut could affect your finances in the months ahead.

    Credit cards

    Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.

    Going forward, annual percentage rates will start to come down, but even then, they will only ease off extremely high levels. With only a few cuts on deck for 2024, APRs would still be around 19% in the months ahead, according to McBride.

    “Interest rates took the elevator going up, but they’ll be taking the stairs coming down,” he said.

    That makes paying down high-cost credit card debt a top priority since “interest rates won’t fall fast enough to bail you out of a tight situation,” McBride said. “Zero percent balance transfer offers remain a great way to turbocharge your credit card debt repayment efforts.”

    Mortgage rates

    Although 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power in the last two years, partly because of inflation and the Fed’s policy moves.

    But rates are already significantly lower than where they were just a few months ago. Now, the average rate for a 30-year, fixed-rate mortgage is around 6.3%, according to Bankrate.

    Jacob Channel, senior economist at LendingTree, expects mortgage rates will stay somewhere in the 6% to 6.5% range over the coming weeks, with a chance that they’ll even dip below 6%. But it’s unlikely they will return to their pandemic-era lows, he said.

    “Though they are falling, mortgage rates nonetheless remain relatively high compared to where they stood through most of the last decade,” he said. “What’s more, home prices remain at or near record highs in many areas.” Despite the Fed’s move, “there are a lot of people who won’t be able to buy until the market becomes cheaper,” Channel said.

    Auto loans

    Even though auto loans are fixed, higher vehicle prices and high borrowing costs have stretched car buyers “to their financial limits,” according to Jessica Caldwell, Edmunds’ head of insights.

    The average rate on a five-year new car loan is now more than 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — likely bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.

    “Many Americans have been holding off on making vehicle purchases in the hopes that prices and interest rates would come down, or that incentives would make a return,” Caldwell said. “A Fed rate cut wouldn’t necessarily drive all those consumers back into showrooms right away, but it would certainly help nudge holdout car buyers back into more of a spending mood.”

    Student loans

    Federal student loan rates are also fixed, so most borrowers won’t be immediately affected by a rate cut. However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Treasury bill or other rates, which means once the Fed starts cutting interest rates, the rates on those private student loans will come down over a one- or three-month period, depending on the benchmark, according to higher education expert Mark Kantrowitz. 

    Eventually, borrowers with existing variable-rate private student loans may be able to refinance into a less expensive fixed-rate loan, he said. But refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.

    Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

    Savings rates

    While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

    As a result of Fed rate hikes, top-yielding online savings account rates have made significant moves and are now paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.

    If you haven’t opened a high-yield savings account or locked in a certificate of deposit yet, you’ve likely already missed the rate peak, according to Matt Schulz, LendingTree’s credit analyst. However, “yields aren’t going to fall off a cliff immediately after the Fed cuts rates,” he said.

    Although those rates have likely maxed out, it is still worth your time to make either of those moves now before rates fall even further, he advised.

    One-year CDs are now averaging 1.78% but top-yielding CD rates pay more than 5%, according to Bankrate, as good as or better than a high-yield savings account.

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  • The Bank of England is widely expected to hold interest rates as inflation stays above target

    The Bank of England is widely expected to hold interest rates as inflation stays above target

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    LONDON (AP) — The Bank of England is widely expected to keep interest rates unchanged on Thursday, a day after official figures showed inflation in the U.K. holding steady at an annual rate of 2.2% in August, with higher airfares offset by lower fuel costs and restaurant and hotel bills.

    Central banks around the world dramatically increased borrowing costs from near zero during the coronavirus pandemic when prices started to shoot up, first as a result of supply chain issues built up and then because of Russia’s full-scale invasion of Ukraine which pushed up energy costs. As inflation rates have fallen from multi-decade highs recently, they started cutting interest rates.

    The latest reading from the Office of National Statistics on Wednesday was in line with market predictions and means that inflation remains just above the British central bank’s goal of 2% for the second month running, having fallen in June to the target for the first time in nearly three years.

    Last month, the central bank reduced its main interest rate by a quarter-point to 5%, the first cut since the onset of the pandemic. It was a close call though with four of the nine members voting for no change.

    Later Wednesday, the U.S. Federal Reserve is expected to cut rates for the first time in four years.

    Most economists think the Bank of England’s monetary policy committee will take a pause on Thursday as some panel members have voiced ongoing worries about price rises in the crucial services sector, which accounts for around 80% of the British economy. Wednesday’s data showed that services sector inflation jumped to 5.6% in August from 5.2% in July as a result of higher airfares across European routes.

    However, they think that the bank will most likely cut again in November, in the wake of the government’s budget on Oct. 30.

    The new Labour government has said that it needs to plug a 22 billion-pound ($29 billion) hole in the public finances and has indicated that it may have to raise taxes and lower spending, which would likely weigh on the near-term outlook for the British economy and put downward pressure on inflation.

    “An interest rate cut on Thursday is looking unlikely with the majority of the Monetary Policy Committee likely to want to assess the impact of next month’s budget before deciding when to loosen policy again,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.

    —
    From AP Buyline: 8 money moves to make as interest rates remain high

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  • Mortgage rates are falling. How far will they go?

    Mortgage rates are falling. How far will they go?

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    For many prospective homebuyers, the last two years have been brutal as high home prices and mortgage rates produced the most unaffordable housing market since the 2000s bubble.

    Many experts don’t expect drastic improvement soon, but a shift could finally be underway.

    The cost of a 30-year fixed mortgage has fallen from above 7% in May to the low-6% range as of last week. On Wednesday, the Federal Reserve is expected to cut its benchmark interest rate for the first time since it began raising it in 2022 in a bid to fight inflation.

    “I think for the next two years, we are in a world where the pressure is on rates to come down,” said Daryl Fairweather, chief economist with real estate brokerage Redfin.

    How much mortgage rates will decline is unclear.

    The cost for a mortgage is heavily influenced by inflation because institutional investors that buy 30-year mortgages that are packed into bundles don’t want to see the value of their investment eaten away.

    Experts attribute the recent decline in mortgage rates to easing inflation, as well as expectations that because consumer prices are rising less, that will enable the Fed to cut its benchmark interest rate.

    The central bank’s federal funds rate does not directly affect mortgage rates, but it can do so indirectly since it sets a floor on all borrowing costs and provides a signal of how entrenched the Fed thinks inflation is.

    Keith Gumbinger, vice president of research firm HSH.com, said a Fed cut Wednesday may not move mortgage rates much because, to some extent, mortgage investors have already priced in the expectation that rates would decline.

    More cuts, however, are expected in the future.

    Gumbinger said if the Fed achieves a so-called soft landing — taming inflation without causing a recession — he would expect mortgage rates to be in the mid-5% range by this time next year.

    If the economy turns sour, mortgage rates could fall further, though even in that scenario Gumbinger doubted they’d reach the 3% and below range of the pandemic.

    Orphe Divounguy, a senior economist with Zillow, predicted that rates would not even fall to 5.5% but would stay around where they are, arguing that the economy is relatively strong and inflation is unlikely to ease much.

    “I don’t think we are going to see a huge drop, but what we have seen has been great for homebuyers so far,” he said.

    Indeed, even modest drops in borrowing costs can have a big effect on affordability.

    If a buyer puts 20% down on an $800,000 house, the monthly principal and interest payments would equal $4,258 with a 7% mortgage; $3,837 with a 6% mortgage; and $3,436 with a 5% mortgage.

    Whether dropping rates bring lasting relief is another question. Falling borrowing costs could attract a flood of additional buyers and send home prices higher — especially if increased demand isn’t met by an increase in supply.

    For now, the number of homes for sale is increasing modestly, rates are falling and home price growth is slowing.

    In August, home prices across Southern California dipped slightly from the prior month. Values were still up nearly 6% from a year earlier, but that was smaller than the 12-month increase of 9.5% in April, according to data from Zillow.

    In theory, this combination of factors could provide prospective buyers an opportunity to get into the market. Many don’t appear to be doing so.

    According to Redfin, 7.8% fewer homes across the U.S. went into escrow during the four weeks that ended Sept 8 compared with a year earlier.

    In Los Angeles County, pending sales were up 2% from a year ago but down from earlier in the summer.

    Fairweather said buyers might not be jumping in now because they haven’t realized rates have gone down or they are temporarily scared off by recent changes to real estate commission rules.

    Some agents say they are noticing a pickup.

    Costanza Genoese-Zerbi, an L.A.-area Redfin agent, said she’s recently noticed more first-time buyers out shopping, leading to an uptick in multiple offers in entry-level neighborhoods where people are more sensitive to rates.

    Other agents aren’t seeing much of a boost.

    Real estate agent Jake Sullivan, who specializes in the South Bay and San Pedro, has a theory: Homes are still far more expensive than they were just a few years ago.

    Home insurance costs have risen as well.

    “The cost of living is just so high,” Sullivan said.

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  • Kroger and Albertsons prepare to make a final federal court argument for their merger

    Kroger and Albertsons prepare to make a final federal court argument for their merger

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    PORTLAND, Ore. — Kroger and Albertsons were expected to present their closing arguments Tuesday in a U.S. District Court hearing on their proposed merger, which the federal government hopes to block.

    Over the course of the three-week hearing in Portland, Oregon, the two companies have insisted that merging would allow them to lower prices and more effectively compete with retail giants like Walmart and Amazon.

    The Federal Trade Commission argued that the deal would eliminate competition and lead to higher food prices for already struggling customers.

    In 2022, Kroger and Albertsons proposed what would be the largest supermarket merger in U.S. history. But the FTC sued to prevent the $24.6 billion deal.

    The FTC wants U.S. District Judge Adrienne Nelson to issue a preliminary injunction that would block the deal while its complaint goes before an in-house administrative law judge.

    In testimony during the hearing, the CEOs of Albertsons and Kroger said the merged company would lower prices in a bid to retain customers. They also argued that the merger would boost growth, bolstering stores and union jobs.

    FTC attorneys have noted that the two supermarket chains currently compete in 22 states, closely matching each other on price, quality, private label products and services like store pickup. Shoppers benefit from that competition and would lose those benefits if the merger is allowed to proceed, they said.

    The FTC and labor union leaders also argued that workers’ wages and benefits would decline if Kroger and Albertsons no longer compete with each other. They also expressed concern that potential store closures could create so-called food and pharmacy “deserts” for consumers.

    Under the deal, Kroger and Albertsons would sell 579 stores in places where their locations overlap to C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly store brands.

    The FTC says C&S is ill-prepared to take on those stores. Laura Hall, the FTC’s senior trial counsel, cited internal documents that indicated C&S executives were skeptical about the quality of the stores they would get and may want the option to sell or close them.

    But C&S CEO Eric Winn testified that he thinks his company can be successful in the venture.

    The attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming all joined the FTC’s lawsuit on the commission’s side. Washington and Colorado filed separate cases in state courts seeking to block the merger. Washington’s case opened in Seattle on Monday.

    Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together, the companies employ around 710,000 people.

    If Judge Nelson agrees to issue the injunction, the FTC plans to hold the in-house hearings starting Oct. 1. Kroger sued the FTC last month, however, alleging the agency’s internal proceedings are unconstitutional and saying it wants the merger’s merits decided in federal court. That lawsuit was filed in federal court in Ohio.

    ___

    Durbin reported from Detroit.

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  • Climate change is making home insurance costs more expensive. These maps show prices and weather risks in your state.

    Climate change is making home insurance costs more expensive. These maps show prices and weather risks in your state.

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    Hurricane Francine in Louisiana, flooding in the Carolinas and wildfires in California are among the extreme weather events impacting millions across the U.S. just in the past week. And it’s not just about the physical risks — it’s having a major impact on the affordability of having a home, as extreme weather continues to feed into the rising costs of home insurance. 

    In some areas, homes are such great a risk that they’re too expensive to insure — if private insurance is even available at all. 

    How much does the average person spend on home insurance?

    Home insurance premiums are intended to be cheaper than what it would cost to rebuild your home after a disaster or major damage. That cost is based on numerous factors, including home size and claim history, but it’s also based on location — and as extreme weather events driven by climate change bring a greater risk of floods, severe storms, hurricanes and heat waves, among other things, that location matters more than ever. 

    Bankrate has found that the average cost of dwelling insurance, which covers the actual structure of your home should it need to be rebuilt, is $2,285 per year in the U.S. for a policy with a $300,000 limit. But that cost is still rising. 


    “From 2017 to 2022, homeowners insurance premiums rose 40% faster than inflation,” a June report by the Bipartisan Policy Center says. “…For millions of households already struggling to make their mortgage payments, these monthly insurance costs are a significant burden. They can also put homeownership out of reach for prospective first-time homebuyers.”

    The range of homeowners’ insurance costs is widespread. In Vermont, Bankrate data shows that people pay an average of $67 a month for a $300,000 dwelling limit, while in Nebraska, the most expensive home insurance state, people pay an average of $471 per month — an annual policy that amounts to more than $3,300 above the national average. 

    Other parts of insurance coverage are not included in these amounts, such as other structures, personal property and loss of use, which are typically listed as coverage B, C and D, respectively, in coverage policies. And depending on your location, you may also need separate deductibles for wind or storm damage, will likely be determined based on a percentage of your dwelling coverage.

    “While inflation has slowed down since its peak in June 2022, insurance rates are reactionary,” Bankrate said in its September report. “The cost of home insurance is still increasing due to the impact inflation has had on the previous losses experienced by the insurance company, the elevated cost of building materials and the high likelihood of future extreme weather-related losses.” 

    Home location matters for insurance costs 

    Across the U.S., people are dealing with risk of earthquakes, tornadoes, floods, hurricanes, wildfires and severe storms across the seasons. In California, which, as of Sept. 17, is battling six active wildfires, the growing risk of such events has left some areas “essentially ‘uninsurable‘,” according to researchers at First Street Foundation, a nonprofit that studies climate risks. The group found that about 35.6 million properties — a quarter of all U.S. real estate — are facing higher insurance costs and lower coverage because of climate risks. 

    That combination also devalues their properties. 

    San Bernardino County, which accounts for six out of the 10 worst ZIP codes in the state for insurance non-renewals, is also among the most at-risk of natural hazards and climate change, according to FEMA. The county in Southern California is currently combatting both the Bridge and Line Fires, which combined have burned more than 93,000 acres. 

    U.S. map showing the National Risk Index by county.


    The fire risk in California — which has also been battling the historically large Park Fire for nearly two months — is now so high that both Allstate and State Farm have paused sales of property and casualty coverage to new customers in the state. 

    “The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes, and higher reinsurance premiums,” Allstate told CBS News.

    AAA is also opting out of renewing some policies in Florida, a state that has seen increasingly devastating impacts of flooding and hurricanes. Without private insurance offers, it’s up to insurance policies made available by the government, such as the the National Flood Insurance Program, to assist. 

    It’s not just an issue for coastal areas and wildfire-prone states. In fact, the most impactful weather events are those that do not get categorized with names. 

    The Insurance Information Institute found in a May 2020 report that severe convective storms — thunderstorms — “are the most common and damaging natural catastrophes in the United States.” Tornadoes are often a product of those storms, and Nebraska, the most expensive home insurance state on average, was impacted by five of the top 10 costliest U.S. catastrophes involving tornadoes, according to the report.  

    There have already been 20 billion-dollar disasters nationwide so far this year, as of Sept. 10, with 14 of those involving severe weather or tornadoes. 

    2024-billion-dollar-disaster-map-1.png
    This map shows the confirmed billion-dollar weather and climate disaster events that have already occurred in the U.S. in 2024. 

    NOAA National Centers for Environmental Information


    As the risk grows, affordability dwindles 

    Nearly half of U.S. homes face a severe threat of climate change, with about $22 trillion in residential properties at risk of “severe or extreme damage” from flooding, high winds, wildfires, extreme heat or poor air quality, according to a study earlier this year by Realtor.com. 

    But Bankrate has also found that more than a quarter of homeowners say they aren’t financially prepared to handle the costs that come with it. 

    And it’s not just homeowners. While last year was not the worst year for overall U.S. insured losses due to extreme weather, it was the worst year since at least 2014 for losses due to severe storms ($59.2 billion), according to data by AON. 

    Renters are feeling those impacts as well. 

    Between 2020 and 2023, multifamily housing development insurance rates increased by an average of 12.5% annually, according to a June report by the Bipartisan Policy Center. 

    “One affordable housing provider, National Church Residences, saw its property insurance premiums increase by over 400% in the six years leading up to 2023, along with higher deductibles and reduced coverage,” the report says. National Church Residences provides affordable housing and independent and assisted living to seniors.  

    Last fall, NDP Analytics surveyed 418 housing providers across the U.S. who operate a combined 2.7 million units, including 1.7 million affordable housing units. They found that nearly a third of them saw premium increases of 25% or more from 2022 to 2023. To handle those costs, over 93% of respondents said they’d have to increase their deductibles, decrease operating expenses and/or increase rent. More than half said they would need to limit or delay investments in housing stock and projects. 

    How to lower home insurance costs

    The driver behind extreme weather events — rising global temperatures largely fueled by the burning of fossil fuels — is not going away anytime soon. The continued release of greenhouse gases that trap heat within the atmosphere will continue to heat up the planet for thousands of years to come, even if overuse of those gases stopped today, which means that there are still decades to come of worsening climate disasters putting lives and homes at risk. 

    But home insurance is a game of measuring risk, and there are things you can do to better protect your home that could help lessen the blow of future weather disasters. 

    According to Massachusetts insurance agency C&S Insurance, resilient home features can make an impact on premium pricing. Storm shutters, reinforced roofing and flood barriers can all help lower the risk of damage to your house, and therefore, your wallet.

    NerdWallet says that elevating your home’s water heaters and electrical panels, developing wildfire-resilient landscaping and installing fortified roofing are among the things homeowners can do to reduce the impacts of flooding, fires and wind, respectively. 

    The Council on Foreign Relations, an independent nonpartisan organization, says that more government regulations on where and how homes can be built can also help reduce the costs. The group says that stopping taxpayer dollars for buildings in high-risk areas and more investment in natural infrastructure, such as wetlands and trees, can also help reduce impacts from storm surges and heat. 

    Li Cohen

    Li Cohen is a senior social media producer at CBS News. She previously wrote for amNewYork and The Seminole Tribune. She mainly covers climate, environmental and weather news.

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  • US retail sales ticked up last month in sign of ongoing consumer resilience

    US retail sales ticked up last month in sign of ongoing consumer resilience

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    WASHINGTON — Americans spent a bit more at retailers last month, providing a small boost to the economy just as the Federal Reserve considers how much to cut its key interest rate.

    Retail sales ticked up 0.1% from July to August, after jumping the most in 18 months the previous month, the Commerce Department reported Tuesday. Online retailers, sporting goods stores, and home and garden stores reported higher sales.

    The data indicate that consumers are still able to spend more despite the cumulative impact of three years of excess inflation and higher interest rates. Average paychecks, particularly for lower-income Americans, have also risen sharply since the pandemic, which has helped many consumers keep spending even as many necessities became more expensive.

    The impact of inflation and consumers’ health has been an ongoing issue in the presidential campaign, with former President Donald Trump blaming the Biden-Harris administration for the post-pandemic jump in prices. Vice President Kamala Harris has, in turn, charged that Trump’s claim that he will slap 10% to 20% tariffs on all imports would amount to a “Trump tax” that will raise prices further.

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  • The Fed is set to cut rates for the first time in 4 years. What does that mean for your money?

    The Fed is set to cut rates for the first time in 4 years. What does that mean for your money?

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    It’s been a long and bumpy road to the Federal Reserve’s first interest rate cut in more than four years — a moment that could prove decisive to the finances of millions of Americans. 

    On Wednesday, the Fed is expected to reduce its benchmark rate, which currently stands at its highest point in 23 years, after the central bank introduced a flurry of rate hikes to tame the pandemic’s high inflation. While economists are unanimous in expecting a rate cut on September 18, they’re split between predicting a 0.25 percentage point cut versus a 0.5 percentage point reduction, according to financial data firm FactSet.

    Whatever the size of the cut, the Fed’s first rate reduction since March 2020 will provide some welcome relief for consumers who are in the market for a home or auto purchase, as well as for those carrying pricey credit card debt. The decision is also expected to kick off a series of rate reductions later this year and into 2025, which could have lasting implications on mortgage and auto loan rates, but could also have a downside of shaving the relatively high returns recently enjoyed by savers.

    “It’s been a long marathon — the Fed feels it’s time to lower interest rates again,” Sara Rathner, co-host of the Smart Money podcast and a personal finance expert for NerdWallet, told CBS MoneyWatch. “Consumers are definitely feeling the pinch. It’s been this one-two punch of higher interest rates and inflation.”

    Wednesday’s rate cut will “present an opportunity for consumers to take a look at their finances and save money on some of their borrowing,” she said.

    When is the Fed’s September 2024 meeting?

    The Fed’s September 2024 meeting will be held from September 17-18, with the central bank scheduled to announce its rate decision at 2 p.m. Eastern time on September 18. 

    That will be followed by a press conference with Fed Chair Jerome Powell at 2:30 p.m. E.T., where Powell will discuss the central bank’s economic outlook. 

    Powell has recently signaled the central bank is ready to reduce its benchmark rate, noting at an August speech that “the time has come” for the Fed to adjust its monetary policy after inflation dropped below 3% on an annual basis and amid  some signs of weakness in the labor market.

    What size of rate cut is expected?

    That’s the big debate among economists, with some predicting that the Fed will shave its benchmark rate by 0.25 percentage points — the Fed’s standard reduction — while others are predicting a jumbo cut of 0.5 percentage points. 

    Regardless of the size, the rate cut will provide some relief to borrowers, albeit at a relatively small dose given that the current Fed funds’ target stands in a range of 5.25% to 5.5%. A reduction of 0.25 percentage points, for instance, would take the target range down to 5% to 5.25%, providing only a small reduction in borrowing costs. 

    “By itself, one rate cut isn’t a panacea for borrowers grappling with high financing costs and has a minimal impact on the overall household budget,” noted Greg McBride, chief financial analyst at Bankrate, in an email. “What will be more significant is the cumulative effect of a series of interest rate cuts over time.”

    Will the Fed cut rates later in 2024? 

    Yes, economists polled by FactSet are predicting rate cuts at the Fed’s November and December meetings —there is no October rate decision meeting. Additionally, many economists expect the Fed to continue to cut throughout 2025, with most forecasting that, by May 2025, the benchmark rate will stand between 3% to 3.5%, according to FactSet.

    “Our baseline forecast is for three consecutive 25bp cuts in September, November and December, and an eventual terminal rate of 3.25%-3.5%,” Goldman Sachs analysts wrote in a September 15 research note.

    How will the rate cut impact mortgage rates? 

    Mortgage rates have surged alongside the Fed’s hikes, with the 30-year fixed-rate loan topping 7% in 2023 as well as earlier this year. That placed homebuying out of financial reach for many would-be buyers, especially as home prices continue to climb. 

    Already, mortgage rates have slid ahead of the September 18 rate decision, partly due to anticipation of a cut as well as weaker economic data. The 30-year fixed-rate mortgage currently sits at about 6.29%, the lowest rate since February 2023, according to the Mortgage Bankers Association.

    But the September 18 rate cut may not result in a significant additional drop in rates, especially if the economy remains relatively strong, Orphe Divounguy, senior economist at Zillow, told CBS MoneyWatch.

    “We expect mortgage rates to end the year kind of roughly where they are now,” he said.

    Even so, this could prove to be the right time for recently sidelined homebuyers to enter the market, Divounguy added. That’s because housing affordability is improving while inventory is scaling back up after a dip in 2022, providing buyers with more choices. 

    Some homeowners with mortgages of more than 7% may also want to consider refinancing into a lower rate, experts said. For instance, a homeowner with a $400,000 mortgage could save about $400 a month by refinancing into a loan at today’s rate of about 6.3% versus the peak of about 7.8% in 2023.

    “Generally, lenders would recommend refinancing when it’s a difference of 1 percentage point or more,” noted Smart Money’s Rathner. 

    What about auto loans, credit cards and other debt?

    Auto loan rates are likely to see reductions after the rate cut, experts said. And that could convince some consumers to start shopping around for a vehicle according to Edmunds, which found that about 6 in 10 car shoppers have held off on buying because of high rates. 

    Currently, the average APR on a loan for a new car is 7.1%, and 11.3% for a used car, according to Edmunds. 

    “A Fed rate cut wouldn’t necessarily drive all those consumers back into showrooms right away, but it would certainly help nudge holdout car buyers back into more of a spending mood, especially coupled with some of the advertising messages that automakers typically push during Black Friday and through the end of the year,” said Jessica Caldwell, Edmunds’ head of insights, in an email.

    Likewise, credit card rates, which have been at historic highs, are likely to follow the rate cut, but this probably won’t make much of a difference for people carrying balances, said LendingTree credit analyst Matt Schulz. He calculates that someone with a $5,000 balance and a card with a 24.92% APR could save less than $1 a month on interest if their APR is reduced by one-quarter percentage point. 

    A better bet, experts say, is to pay down the debt, if possible, or look for a zero-percent balance transfer card or a personal loan, which typically carries a lower rate than credit cards.

    How will a Fed cut impact savings accounts and CDs?

    If rate hikes have a silver lining, it’s that savers have enjoyed high rates on certificate of deposits (CDs) and high-yield savings accounts. Some banks have offered APYs as high as 5%, giving Americans a chance to juice their savings accounts.

    But that may be finally coming to a close, Schulz noted. 

    There’s still time for people to take advantage of relatively high rates, even if they slide slightly in the coming months, he added. “I don’t think anybody should expect rates to fall off a cliff immediately,” he said.

    Still, some experts have predicted that the top savings accounts could see rates drop by as much as 0.75 percentage points after the Fed cuts rates. Even so, consumers can still benefit by moving money from a traditional savings account into a high-yield savings account, which can help them build up an emergency fund or bolster their savings with higher returns.

    As for CDs, Schulz recommends people lock in rates now, if they can. “Rates are already starting to come down, and they’re only going to continue to come down,” he said. 

    Aimee Picchi

    Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.

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  • It’s a big week for central banks around the world, with a slew of rate moves on the table

    It’s a big week for central banks around the world, with a slew of rate moves on the table

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    Federal Reserve Chair Jerome Powell announces interest rates will remain unchanged during a news conference at the Federal Reserves’ William McChesney Martin Building in Washington, D.C., on June 12, 2024.

    Kevin Dietsch | Getty Images

    A flurry of major central banks will hold monetary policy meetings this week, with investors bracing for interest rate moves in either direction.

    The Federal Reserve’s highly anticipated two-day meeting, which gets underway on Tuesday, is poised to take center stage.

    The U.S. central bank is widely expected to join others around the world in starting its own rate-cutting cycle. The only remaining question appears to be by how much the Fed will reduce rates.

    Traders currently see a quarter-point cut as the most likely outcome, although as many as 41% anticipate a half-point move, according to the CME’s FedWatch Tool.

    Elsewhere, Brazil’s central bank is scheduled to hold its next policy meeting across Tuesday and Wednesday. The Bank of England, Norway’s Norges Bank and South Africa’s Reserve Bank will all follow on Thursday.

    A busy week of central bank meetings will be rounded off when the Bank of Japan delivers its latest rate decision at the conclusion of its two-day meeting on Friday.

    “We’re entering a cutting phase,” John Bilton, global head of multi-asset strategy at J.P. Morgan Asset Management, told CNBC’s “Squawk Box Europe” on Thursday.

    Speaking ahead of the European Central Bank’s most recent quarter-point rate cut, Bilton said the Fed was also set to cut interest rates by 25 basis points this week, with the Bank of England “likely getting in on the party” after the U.K. economy stagnated for a second consecutive month in July.

    “We have all the ingredients for the beginning of a fairly extended cutting cycle but one that is probably not associated with a recession — and that’s an unusual set-up,” Bilton told CNBC’s “Squawk Box Europe.”

    “It means that we get a lot of volatility to my mind in terms of price discovery around those who believe that actually the Fed [is] late, the ECB [is] late, this is a recession and those, like me, that believe that we don’t have the imbalances in the economy, and this will actually spur further upside.”

    Fed decision

    Policymakers at the Fed have laid the groundwork for interest rate cuts in recent weeks. Currently, the Fed’s target rate is sitting at 5.25% to 5.5%.

    Some economists have argued the Fed should deliver a 50 basis point rate cut in September, accusing the central bank of having previously gone “too far, too fast” with monetary policy tightening.

    Others have described such a move as one that would be “very dangerous” for markets, pushing instead for the central bank to deliver a 25 basis point rate cut.

    We'd 'love' to see a 50-basis-point cut by the Fed, analyst says — here's why

    “We are more likely 25 but [would] love to see 50,” David Volpe, deputy chief investment officer at Emerald Asset Management, told CNBC’s “Squawk Box Europe” on Friday.

    “And the reason you do 50 next week would be as more or less a safety mechanism. You have seven weeks between next week and … the November meeting, and a lot can happen negatively,” Volpe said.

    “So, it would be more of a method of trying to get in front of things. The Fed is caught on their heels a little bit, so we think that it would be good if they got in front of it, did the 50 now, and then made a decision in terms of November and December. Maybe they do 25 at that point in time,” he added.

    Brazil and UK

    For Brazil’s central bank, which has cut interest rates several times since July last year, stronger-than-anticipated second-quarter economic data is seen as likely to lead to an interest rate hike in September.

    “We expect Banco Central to hike the Selic rate by 25bps next week (to 10.75%) and bring it to 11.50% by end-2024,” Wilson Ferrarezi, an economist at TS Lombard, said in a research note published on Sept. 11.

    “Further rate hikes into 2025 cannot be ruled out and will depend on the strength of domestic activity in Q4/24,” he added.

    Traffic outside the Central Bank of Brazil headquarters in Brasilia, Brazil, on Monday, June 17, 2024.

    Bloomberg | Bloomberg | Getty Images

    In the U.K., an interest rate cut from the Bank of England (BOE) on Thursday is thought to be unlikely. A Reuters poll, published Friday, found that all 65 economists surveyed expected the BOE to hold rates steady at 5%.

    The central bank delivered its first interest rate cut in more than four years at the start of August.

    “We have quarterly cuts from here. We don’t think they are going to move next week, with a 7-2 vote,” Ruben Segura Cayuela, head of European economics at the Bank of America, told CNBC’s “Squawk Box Europe” on Friday.

    He added that the next BOE rate cut is likely to take place in November.

    South Africa, Norway and Japan

    South Africa’s Reserve Bank is expected to cut interest rates on Thursday, according to economists surveyed by Reuters. The move would mark the first time it has done so since the central bank’s response to the coronavirus pandemic four years ago.

    The Norges Bank is poised to hold its next meeting on Thursday. The Norwegian central bank kept its interest rate unchanged at a 16-year high of 4.5% in mid-August and said at the time that the policy rate “will likely be kept at that level for some time ahead.”

    The Bank of Japan, meanwhile, is not expected to raise interest rates at the end of the week, although a majority of economists polled by Reuters expect an increase by year-end.

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  • 5 more takeaways from Denver’s 2025 city spending plan

    5 more takeaways from Denver’s 2025 city spending plan

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    The big headline of Denver’s budget this year is that the city will have to tighten its belt, as consumer spending and softening sales tax revenue is slowing growth for cities across the country. 

    Mayor Mike Johnston released his 2025 budget Thursday. In case you don’t have time to read a nearly 800 page document, here are the key takeaways from the proposal. 

    The budget is tighter than usual this year.

    Denver’s 2025 budget will see its slowest growth since 2011 and the first reduction in full-time employees in a decade, not including the pandemic. 

    Next year’s budget is growing by just 0.6 percent. In comparison, the city projected 4 percent revenue growth for 2024, the current budget year.

    “Keeping our growth at this size involved several tough decisions,” said Nicole Doheny, chief financial officer for the city.

    There would not be furloughs or layoffs under this proposal. To save costs, the mayor’s office is leaving open vacant positions, reducing spending on supplies and making use of city reserves.

    Denver has about $14 million more in pandemic recovery money to spend as well.

    Other cities have also seen slowing growth. Seattle has a $260 million funding gap, and Los Angeles cut 1,700 vacant positions.

    Spending on homelessness and new immigrants is decreasing.

    The city is spending a lot less on homelessness programs, compared to last year. But 2024 was an unusual year for that spending, since the city made major one-time purchases of things like hotels to use as shelter. Those were paid for with a mix of federal and local money.. 

    Funding for Johnston’s homelessness program, All In Mile High, is decreasing from $141 million in 2024 to $57.7 million in 2025. Johnston said the focus will be on funding for the city’s programs, rather than on capital costs like buying property.

    In a press conference Thursday, Johnston called it “one of the lowest carrying costs for homelessness resolution in the country.”

    But some anti-homelessness programs are also seeing cuts. Funding for rental assistance is decreasing, from $30 million to $20 million, even as evictions reach record-breaking levels. Last year, nonprofits, advocates and a group of city council members made rental assistance one of the top sticking points of Johnston’s 2024 budget, securing an additional $13.5 million for renters facing eviction.

    As the number of new immigrants arriving in the city has decreased, that funding is dropping as well, from $90 million in 2024 to $12.5 million in 2025. That was one of Denver’s biggest unexpected costs in 2023 and early 2024. 

    Since new immigrants started arriving at the end of 2022, the city has received some state and federal reimbursements for supporting immigrants. But when Republicans in Congress killed a bipartisan immigration reform bill earlier this year, it left more of the cost to the city, and Johnston imposed budget cuts in response.

    Johnston is still focused on growing Denver’s police force.

    Similar to last year’s budget, the 2025 budget includes funding for 168 new police recruits, plus 24 new firefighters and 60 new sheriff’s deputies. And like last year, Johnston said the goal is for new police recruits to outpace retirements in order to grow the force. Denver Police has struggled with understaffing in the past few years.

    Denver’s police alternative, STAR, is getting a bump. The program, which sends mental health responders and paramedics to nonviolent calls, would get $6.9 million, up from $6.2 million in 2024. 

    Growing STAR is something some council members and advocates have asked for in the past. Last year, a group of council members tried to repurpose nearly $4 million of police funding for STAR, but that amendment failed amid questions about whether the program could spend all the money at its current capacity.

    STAR has room to grow. It responded to more than 7,000 calls in 2023, its highest response rate since it started in 2020. But staff said 15,000 calls were eligible for STAR responses — they just didn’t have the resources.

    City employees would get raises under the proposed budget.

    Johnston is proposing an average 4 percent merit raise for employees.

    Johnston said that’s in response to the many emergencies staff have responded to, including COVID-19, homelessness and the spike in new immigrants.

    “Our city employees over the last four years have seen more days of emergency operation than the city of Denver saw the previous 40 years before that,” Johnston said. “I think it’s important to both invest in those employees, support them and retain them.”

    The city didn’t immediately respond to a question about the cost of raises.

    City council and homeless advocates got a few wins.

    Johnston responded to calls from some city council members and homelessness advocates to improve the availability of emergency shelters during cold weather. Council members Shontel Lewis and Sarah Parady introduced legislation in November that got shelved at the time. But on Thursday, Johnston said he would implement a key change from their proposal. 

    The city is budgeting $1.2 million to open cold-weather shelters when the temperature drops to 25 degrees, instead of waiting for temperatures to go as low as 20 degrees, which is the current policy. The shelters will also stay open for 24 hours, rather than just 12-hour stints. The city expects that move will increase the number of days those shelters are open from 40 days to 80 days per season.

    To open the new cold-weather shelters, the city is shutting down and converting its immigrant shelters. The number of new immigrants arriving in the city has dropped sharply since last winter.

    Denver also will start an Office of Community Engagement at a cost of $200,000, something city council has been researching for the past few years and has proposed in past budgeting cycles. The office will specialize in neighborhood outreach.

    And businesses that will be affected by downtown construction will also get more money for support, with an added $2.5 million for businesses affected by 16th Street Mall and Colfax Avenue projects.

    Denver Health is still in trouble.

    One of Colorado’s only safety net hospitals is facing a major funding crisis. Costs of care for patients — many of whom lack insurance — have skyrocketed, while money from the city and private insurance has stayed relatively flat for many years.

    Supporters of the hospital are running a ballot measure that would add a 0.34 percent sales tax to raise about $64 million for Denver Health. Without it, CEO Donna Lynne has said the hospital might need to cut services. 

    We don’t yet know if the tax hike will pass this November.

    Meanwhile, the city is promising an increase to its own contribution. Johnston touted a 3 percent increase in the city’s budget for the hospital at his press conference Thursday. But Denver Health CEO Donna Lynne said that basically amounts to an adjustment for inflation. She was hoping for $30 million in emergency funding for the hospital in case the ballot measure doesn’t pass.

    “This is literally inflation for a minuscule part of our budget,” she said. “We lose money on almost all the services we provide to the city.”

    What’s next for the budget?

    Next, different departments will come to city council to explain their plans for the next budget year. That will happen between Sept. 16 and 20, and it’s a good chance to find out what different city agencies are up to — you can find that schedule here.

    In October, council will have a chance to make recommendations to the mayor, who must release his final budget draft by Oct. 21. 

    On Oct. 28, the public can weigh in on the budget at city council’s public hearing. Also, throughout October, city council can pass amendments to the budget. Those amendments must be approved by the mayor or overridden if Johnston chooses to veto them instead.

    City council must vote on the final budget by Nov. 12. Here’s the full schedule.

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  • Montana’s hot housing market heats up critical Senate race

    Montana’s hot housing market heats up critical Senate race

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    MISSOULA, Mont. — In a subdivision near the northern edge of town, a number of condos and duplexes have popped up in the past three years.

    It’s part of a larger effort, including new zoning laws, to help provide affordable housing to Montanans who have found themselves priced out of the market, said DJ Smith, president of the Montana Association of Realtors.

    “For Montanans, it’s been harder and harder to find a home that meets their needs and is affordable,” he said.

    An influx of out-of-state residents relocating to the Big Sky state has sent demand soaring, while a shortage of labor keeps housing supply limited. The result is not only more condos and duplexes, but a hot-button issue in a Senate race that could ultimately decide who controls the chamber.

    While some Democrats are sweating it out in close races across the country, no incumbent has a harder re-election than Democratic Sen. Jon Tester, who will need to win a state that Trump won by 16 percentage points in 2020.

    Political forecaster Cook Political Report recently moved the race from a toss-up to leaning Republican, and the most recent poll from the AARP found Sheehy had an 8-point lead, just within the margin of error.

    Tester has made housing a cornerstone of his campaign — specifically how to help Montanans who have been priced out as more people have moved to the state, driving up housing prices.

    “We’re seeing a lot of folks come into the state, rich folks, who want to try to buy our state, to change it into something it’s not,” Tester said at a June 9 debate hosted by the Montana Broadcasters Association.

    Tim Sheehy, the Republican nominee, is a former Navy SEAL who founded an aerial firefighting company in Montana. He blames high housing costs on inflation, and blames inflation on laws backed by President Joe Biden and voted on by Tester.

    “Our biggest challenge growing our company was convincing folks to come to Montana and absorb these crazy housing costs,” Sheehy said during the debate. “They’re a direct result of the policies coming out of the Biden administration.”

    A new home for sale in Missoula, Montana, where housing prices have jumped in recent years on Sept. 4, 2024.

    CNBC

    Inflation and housing costs are a top concern across the country, but few places are worse than Montana when it comes to affordability. The National Association of Realtors rated Montana the least affordable state for home buyers. Housing prices in the state have increased 66% in the past four years, according to the U.S. Federal Housing Industry Price Index – faster than the 50% increase nationally.  

    Smith said some Montanans are no longer able to afford the communities they grew up in as those moving to the state have sold their homes in more expensive parts of the country and are able to buy in cash.

    The median income for a household in Montana is $67,631, according to the U.S. Census Bureau. That means the median home price in Missoula, $568,377, according to the Missoula Organization of Realtors, is high for the average Montanan, but it’s inviting for those looking to leave higher-cost states for Montana’s mountains, national parks and ample space.

    “People in Colorado, California, they would sell their homes for over a million dollars and have a lot of equity to purchase here in Montana,” Smith said. “That’s led to a record number of 30% of our homes last year being bought with cash.”

    Missoula builder Andrew Weigand, owner of Butler Creek Development, said prices are also affected by a labor shortage in the state. Subcontractors, such as plumbers and electricians, are in short supply and costs are higher as a result, he said.

    “If you have a pool of three or four subcontractors to use, and not 30 or 40, you’re going to have not as competitive a market as you do in other areas of the nation,” he said.

    Read more CNBC politics coverage

    Weigand said he is worried the issue will only get worse because many subcontractors are getting older and there are fewer people to replace them.

    “A lot of our trades are aging. They’ve been doing it for 20 [or] 30 years, and they’re looking at retirement,” he said. “There’s not a whole lot of … young professionals or young people that are interested in performing those jobs to fulfill that need.”

    Tester has several proposals targeted at helping Montanans who are struggling to afford a home. Those include grants to expand housing and help with home repairs. He has also proposed a tax credit to incentivize the owners of mobile home parks to sell their property to coalitions of Montana residents rather than to developers who could use the land to build more expensive homes.

    While Sheehy has blamed high housing prices on inflation, during the June 9 debate he called for expanding trade programs in the state to help with the shortage of contractors needed to build homes.

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