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Gas Leads Rise in Inflation Rate, Wells Fargo Reportedly Expects More Layoffs, Mortgage Applications Drop

Gas Leads Rise in Inflation Rate, Wells Fargo Reportedly Expects More Layoffs, Mortgage Applications Drop

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Gas Leads Rise in Inflation Rate

Rising costs for energy, especially gasoline, were particularly notable as August’s annual inflation rate reached 3.7%, up from 3.2% in July, the Labor Department reported.

Overall energy costs were up 3.6% for the year, with food costs 4.3% higher as those categories were among the biggest contributors to total inflation. Not counting more volatile food and energy costs, government data showed core inflation for the past three months was actually historically low, at 2.4% on an annual basis.

Analysts at Oxford Economics said an August uptick for core inflation is a signal that risks remain in favor of potential further interest rate hikes by the Federal Reserve, which is looking to reach an annual inflation rate of 2% before fully stopping rate hikes.

“However, we expect that a slowing economy, looser labor market conditions and moderating wage growth will support a further deceleration in inflation, allowing the Fed to keep policy steady until it begins to gradually cut rates in mid-2024,” Oxford Lead U.S. Economist Nancy Vanden Houten said in a statement Wednesday.

National Association of Realtors Chief Economist Lawrence Yun noted inflation overall is still below the 9% levels seen a year ago. But shelter costs are still putting pressure on consumers with rents up 7.3% from a year earlier in August, though the latest rent gain from a month earlier was the lowest monthly rise seen in two years at 3.5%.

“That means that a heavyweight component of overall inflation will be much calmer in upcoming months, ” Yun said.

Wells Fargo Expects More Layoffs

Chief Financial Officer Mike Santomassimo said this week banking giant Wells Fargo expects more layoffs after it previously cut 40,000 jobs since late 2020.

The company is responding to financial pressures, especially in its mortgage division as interest rates have been rising and demand for loans has fallen.

"I do think that there's more to do, and you'll see that through the headcount number," he said, according to several media reports, without disclosing an exact number.

Wells Fargo has previously reported plans to reduce its workforce as it also considers pullbacks in its real estate to improve efficiency. Word of potentially more job cuts arrives as San Francisco-based Wells Fargo recently reached a construction milestone on a new regional facility it is building near Dallas. Wells Fargo did not return requests for comment about the job cuts.

Financial services, along with technology and healthcare, are among industries announcing rising layoffs this year in response to economic uncertainties.

Mortgage Applications Decline

Mortgage applications declined 0.8% from the prior week for the week that ended Sept. 8, the latest in a series of weekly drops amid historically high mortgage rates.

The Mortgage Bankers Association said Wednesday its latest tracking included an adjustment for the Labor Day holiday. The volume of purchase applications was down 1% from the prior week but dropped 27% from the corresponding week of 2022.

Refinance applications declined 5% for the week and were down 31% from a year earlier. Mortgage rates have remained around 20-year highs for the past month, with 30-year loans averaging more than 7%.

“Mortgage applications decreased for the seventh time in eight weeks, reaching the lowest level since 1996,” said Joel Kan, the banker group’s deputy chief economist, in a statement.

“Given how high rates are right now, there continues to be minimal refinance activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate,” Kan said.

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