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Mortgage rates retreated for the second day in a row Friday after a survey showed the manufacturing sector contracted in February for the 16th consecutive month, adding to the case that the Federal Reserve can cut short-term rates without fueling inflation.
Another key inflation metric, the personal consumption expenditures (PCE) price index, showed inflation continued to decelerate in January in line with economists’ expectations, bringing mortgage rates down by five basis points Thursday.
Friday’s release of the Institute for Supply Management’s Manufacturing PMI registered 47.8 percent in February, down 1.3 percentage points from January. A reading below 50 percent indicates the manufacturing sector is contracting.
While Fed policymakers are determined to get inflation back down to their 2 percent target, holding rates too high, for too long, could plunge the economy into a recession.