The week begins with Federal Reserve Governor Christopher Waller’s upcoming speech. In his last remarks, Waller suggested that current monetary policy is restrictive enough to allow for a 25 basis point rate cut, followed by a pause to assess inflation trends. This gradual approach makes sense given the uncertainty around potential tariff impacts on the economy.
Housing Market in Focus
This week delivers a flood of housing data that should provide key insights into market dynamics.
Both existing and new home sales reports will likely confirm that new homes continue to capture an unusually large share of total sales. The existing home sales data reflects contracts signed in April, during peak uncertainty that sent stock markets tumbling. However, improved consumer confidence in May should show up as more homes going under contract that month.
The Case-Shiller home price index will confirm trends we already know from more timely data sources like Zillow – it typically lags by over a month. Nationally, home price growth is slowing and prices are expected to decline year-over-year.
Recent Zillow data shows home values rose month-over-month in 36 of the 50 largest metro areas in May. The biggest gains appeared in Buffalo and Cleveland (both 1.7%), Milwaukee (1.5%), Hartford (1.4%), and Pittsburgh (1.4%). The steepest declines hit San Jose (-0.8%), Miami (-0.4%), San Francisco (-0.3%), Austin (-0.2%), and Orlando (-0.1%).
Home builders continue adjusting profit margins to make their properties affordable for buyers. This should drive sustained – though more moderate – increases in new home sales, especially since builders face less competition from existing homeowners reluctant to sell.
The Big Event: PCE Inflation Data
The week’s most crucial release will be the PCE inflation report. The personal income and spending components will reveal how consumers are managing their finances. Any increase in precautionary savings could signal an economy poised to cool further in the second half of 2025.
The price index will likely show that goods inflation has firmed up somewhat, slowing the overall pace of disinflation. If inflation comes in higher than expected, it could heighten stagflation concerns – particularly if tariffs materialize – potentially keeping the Fed on the sidelines and preventing rate cuts.
