Market Update May 16, 2024
One liner: CPI came out as expected Wednesday and soft retail sales resulted in better mortgage rates.
Market Update
Impact to Rates: Mostly improved.
The Consumer Price Index (CPI) is a favorite measure of inflation for markets.
Because inflation is bad for mortgage rates, tame inflation can lead to dropping mortgage rates and other types of rates in the economy.
Yesterday's CPI print was well received. Both core CPI (which excludes volatile food and energy components) and the all-inclusive CPI numbers came in as expected. Helping rates further, retail sales came in softer than expected.
Bonds, which drive mortgage rates, rallied. Some lenders reported rates nearly back at April levels.
Markets appear content that CPI didn’t surprise to the upside like last month. Still, it’s not enough for the Fed to cut its benchmark interest rate immediately. The annualized 3-month core CPI remains at 4.1% while the Fed continues to target 2%.
But experts suggest that the road to a Fed rate cut in September begins with a print like this followed by additional soft CPI reports over the summer.
The Labor Department reported falling numbers of new unemployment claims. Reuters reports the 220,000 print was in line with expectations.
In all, it was a positive couple days for mortgage rates.
Emily Overton has worked in capital markets inside the mortgage industry for over 7 years. She is currently employed by Veterans United Home Loans as a Capital Markets Manager.
