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Inflation Trends, Mortgage Rates and Predictions

Hello everyone. Welcome back to the Mortgage Rundown. Today we are going to talk about what's happening with inflation.

Yesterday we got the latest data on inflation. While headline inflation did move higher, core inflation was in line with expectations. Core CPI is now running at an annualized rate of 4.3% for August, which is down from 4.7% in July. Very good news for mortgage rates.

If you look at the chart on your screen, you can see that Core CPI has come down since its peak last September but it's still going to take a little bit of time to see that figure below 3%, which is near the Fed's target.

There was a fair amount of encouraging signs in the report which would indicate that there are disinflationary pressures, but the high cost of housing and transportation services, thanks to a very strong job market, are making the Fed's job very difficult.

What all of this means is that more likely than not, the Fed will not raise interest rates next week but there is still a small chance that they could raise rates on November 1^st depending upon whether or not inflation will continue to slow down between now and then.

Looking ahead, we won't have a ton of important data until the end of this month when we get PCE, which is the Fed's preferred inflation measurement, and equally as important, the jobs data for September which comes out on October 6^th.

Until then, expect a bit of volatility as the market continues to digest the inflation data and repositions itself ahead of the upcoming jobs report.

That's it everyone from the capital markets desk this week. Thank you all for watching and have a great day.