The recent reversal, during this year’s first quarter, of the declining trend in inflation in the United States led the central bank to postpone any reduction in interest rates, “to allow restrictive policy further time to work.” This turned the attention to identifying the sectors responsible for the price increases. Among them, the volatile energy sector and the interest rate sensitive housing market stand out.       

 Last month, West Texas oil prices ominously approached $90 per barrel, reflected in regular gasoline prices in the United States closer to $4.00 per gallon. However, despite the production cuts by the Organization of Oil Exporting Countries, increased production in the Americas has contributed to oil prices receding to less than $85 and gasoline prices to around $3.50 per gallon. Contrary to experience, it is astonishing that hostilities in Eastern Europe and the Middle East have not caused yet a major upsurge in oil prices.

The other factor responsible for last quarter’s inflationary increase originated in the housing market, which is highly sensitive to interest rates. After a positive start during the first two months of this year, the average interest rate for a 30-year fixed mortgage increased in March to 7.1 percent. Home sales on an annual basis decreased 3.7 percent also in March, extending the 2023 fall in sales to the lowest level in almost 30 years.


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