Evan Ramstad
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My, it was a beautiful day in Minnesota Tuesday.

The weather and the economic news sent the same message: Wait a few months. Better times are coming.

Data on October consumer prices showed inflation continued to ease. That excited investors who interpreted the news to also mean that interest rates will no longer rise and, even better, they will soon begin to fall.

"The Fed just might be done," said Craig Johnson, chief market technician at Piper Sandler Cos. in Minneapolis, referring to interest rate hikes by the Federal Reserve that started early last year.

"The probabilities as of right now to get a hike in December is zero, and for a hike for January is zero," Johnson said, citing a Bloomberg index. "After that, every meeting for 2024 has a higher probability of a cut."

So we've just got to get through winter? Same as waiting for our next batch of 60-degree days?

Yes, as long as your expectations are in check. Interest rates won't fall quickly, nor back to the 2% to 3% level of the late 2010s through the pandemic. The real wait for affordable money could stretch through next winter, too.

"People should be a little bit cautious that the cost of money is going to come down," Ben Marks, a Minnetonka-based financial adviser, said. "I don't think it's going to come down significantly."

For one thing, at 3.2% in October, U.S. inflation is still well above the 2% target of the Federal Reserve's rate-setters. "Inflation is sticky and it's not going to diminish on a linear path," Marks said.

Central bank leaders, including Fed Chair Jerome Powell and Minneapolis Fed President Neel Kashkari, have made it clear they're still focused on taming inflation.

"The [rate-setting] committee is not thinking about rate cuts right now at all," Powell said two weeks ago after the most recent meeting of the Fed's policymakers.

"We're not talking about rate cuts," he added. "We're still very focused on the first question, which is: Have we achieved a stance of monetary policy that's sufficiently restrictive to bring inflation down to 2 percent over time, sustainably?"

Demographic change is another influence. The retirement of baby boomers, coupled with limits on legal immigration, created labor scarcity that's different from just a few years ago.

That will mean ongoing upward pressure on wages, and thus inflation. And those boomers have plenty of money to spend, which will keep pushing prices higher.

Government spending, on infrastructure at the national level and on education, health and transportation in Minnesota, will also keep a steady demand for people, goods and services. Last month, a wastewater board in the northern Minnesota town of Tower got just one bid for construction of a new treatment plant — at twice its estimated price.

The Federal Reserve last raised the main interest rate in July to the 5.25% to 5.5% range. That drove mortgage rates above 8% and auto loan rates above 6% for all but the highest-scoring borrowers.

Since 1989, the average length of time between the last hike and first cut is 8.2 months, Johnson said. That's a great time to be an investor. The S&P 500 index rose 13% on average during those periods. And in the six months after a rate cut, the S&P rose 6.6%.

Once interest rates start to come down, they tend to do so slowly, which is what we all should want. The Federal Reserve would only make quick cuts in rates if the country tipped into recession.

Denise Mazone, a real estate agent in Golden Valley, woke up Tuesday to the inflation data while out in California at the national convention of the National Association of Realtors. She said there are two sides to the news.

On the plus side, lower rates will spark movement in the Twin Cities home market, which has seen a 16.5% decline in purchase agreements this year through October.

On the other, Mazone said, "If the rates start coming down we're going to start seeing a lot of multiple-offer situations again. It's good for the sellers. It's harder on the first-time buyer."

There's already been a break in mortgage rates. The 30-year fixed mortgage rate hit 8.03% nationally on Oct. 19 and is around 7.4% this week, said David Arbit, chief researcher for the Minneapolis Area Association of Realtors. For the buyer of a $350,000 home who is financing $300,000 of it, that means the monthly payment has dropped $150.

"Despite this welcome decline in rates that's definitely helpful, I'm afraid it won't be enough for 50 percent of Minnesotans earning below the median income who also have dreams of home ownership," Arbit said.