Mortgage Rates Today, October 14, 2026: Today's Consumer Price Index Could Be Huge

The bigger picture

Mortgage rates fell moderately yesterday. It's no big mystery why. Bonds (one type of which determines mortgage rates) are more attractive to investors now that their yields are higher. That does mean they can't fall much lower or they'll become less attractive again.

An exception might occur if today's consumer price index (CPI) comes in lower than expected. Mortgage rates could easily fall sharply if that happens. However, they could rise equally sharply if we get higher-than-expected numbers this morning.

Scroll on down for much more on the forces affecting mortgage rates today, including the economic reports on this morning's calendar.

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What's coming up?

Normally, economic reports are the main drivers of changes to mortgage rates. But these are not normal times.

And, until recently, only blockbuster reports, mostly concerning employment and inflation, have had an appreciable impact over much of this year. More important have been the general mood in markets and economically consequential news. News items concerning the war, employment, inflation, tariffs, and deficit funding are especially influential at the moment.

The Fed

On Sep. 16, the Federal Reserve's rate-setting body (the Federal Open Market Committee or FOMC) hiked general interest rates for the first time in three years.

That vote was unanimous. But official Fed documents revealed that FOMC members are deeply divided over what comes next.

"Sixteen of 19 officials expect another increase at either their October or December meeting," reported MarketWatch soon after the meeting. "For next year, 10 officials signaled they see no more moves, but eight officials are penciling in another quarter-point increase."

Such small majorities within the FOMC suggest the number and timing of future rate hikes will likely be driven by key data: inflation and employment reports in the coming months. The Fed's twin mandates are to keep the inflation rate down at around 2% (something it's failed to achieve over the last five years) and to maintain healthy employment levels.

Unfortunately, we think it is likely that inflation will remain elevated well into 2027, even if the Iran war ends soon. We suspect that the global oil market is in such bad shape that it will take a long time for gas and diesel prices to fall back to anything close to pre-war levels. More on that below.

And recent stronger-than-expected economic data mean we might not see rising unemployment, leaving the Fed free to focus on inflation.

The most recent PCE price index showed inflation rising more slowly than expected. And the most recent jobs report showed a weaker employment market than expected. Those encouraged investors to think the FOMC might skip a rate hike at its next meeting on Oct. 28.

Last night, the CME FedWatch put the chances of such a hike at 20.5% (it had been 21% on Monday evening), up from 19.9% a week previously. However, the FedWatch tool reckons there's an 87.8% probability of a hike at the committee's following meeting on Dec. 9: 68.7% for a small, 25-basis-point (0.25%) increase and 19.1% for a larger 50-basis-point jump.

We had sight of the latest FOMC minutes on Oct. 7. But they really told us little that we didn't already know.

"The minutes highlighted that 'many' officials emphasized that higher rates would be 'prudent on risk-management grounds,' acting as insurance against inflation remaining persistently high due to the risk of supply shocks," reported Barron's that afternoon. That was less information than we'd gleaned from Fed documents immediately after the meeting.

Today's CPI report could affect the Fed's rate decision on Oct. 28. That's part of the reason it could move mortgage rates so far, provided it's different from market expectations.

The FOMC doesn't directly set new fixed-rate mortgage rates. But the factors that influence its decisions (and to a lesser extent the decisions themselves) certainly do move those rates, usually ahead of Fed rate-change announcements.

The war

"Over the weekend, the Iran-backed Houthi militia attacked an international airport in Saudi Arabia’s capital, Riyadh, including one strike that killed at least 12 people and injured hundreds," reported The New York Times on Oct. 12. "It was the deadliest attack in a Gulf Arab country since the U.S.-Israeli war with Iran began in February and brought the war to the center of the Middle East’s oil industry."

On Oct. 13, The New York Post reported on tanker traffic in the region: "Ships around the Strait of Hormuz are suffering their worst attacks of the war so far, with 24 ships struck in the past two weeks — causing oil exports to plummet to less than half the pre-war flow."

"The US is dispatching roughly 9,000 sailors and Marines aboard a flotilla of warships to the Middle East, a major naval buildup that could bring three American aircraft carriers to the region by late October or November as President Donald Trump warns that renewed strikes against Iran remain possible," reported Gulf News on Oct. 2. There are already 50,000 U.S. troops in theater.

Iran's forces comprise 640,000 regular troops and 350,000 reservists. Of course, U.S. troops are far better armed, trained, and equipped. But we suspect that the likely cost in blood and treasure will make any American president hesitate before launching a full-scale land invasion.

So, we're guessing the Pentagon intends to mostly continue relying on airstrikes, with additional ground forces only in limited roles, if any. Seizing Kharg and Qeshm Islands seems one possibility.

The U.S. force surge may also be used to help Saudi Arabia, which, for some weeks, has been struggling to resist escalating attacks by Iranian-backed Houthi rebels, who are based in neighboring Yemen.

Oil prices moved higher on most September days. Last night, the price of global benchmark Brent crude was $106.29 a barrel, a little higher than Monday evening's $106.12, although it was falling at the time. That seems surprising, given The New York Post's report (above) of dwindling oil flows through the Strait of Hormuz.

Peace talks with Iran and mediators had already stalled before recent escalations, and President Donald Trump adopted a new strategy of economic warfare on Tehran. "Treasury Secretary Scott Bessent said the U.S. is launching a new campaign to isolate the Iranian regime, warning that countries and companies that do business with Tehran will face the wrath of the Trump administration," The Wall Street Journal reported on Aug. 24.

Iran is certainly in a weak position economically, and waiting for it to buckle may be a smart way to resolve the conflict. However, markets remain anxious for a rapid resolution of the situation that permits the speedy normalization of oil markets.

The war, oil prices, inflation and mortgage rates

Mortgage rates respond to war news because a prolonged full or partial closure of the Strait of Hormuz could again choke off 20% of the world's oil supply, putting additional pressure on gas, diesel, fertilizer, and many other prices. It would take years to build the infrastructure necessary to bypass the Strait completely.

As Iran has escalated its attacks on tankers in the Strait of Hormuz, and its Houthi allies have increased airstrikes on Saudi Arabia, the global oil industry has come under increasing strain. True, oil prices are high, although not near their recent highs, but some of that strain is due to refinery issues (see below) and market manipulations by governments and suppliers.

Strategic petroleum reserves in the U.S. and elsewhere are at multi-decade lows, leaving less room to cushion consumers from rising gas prices. It may not feel like it, but this method of suppressing pump prices has been in place almost since the conflict began. And some observers worry that it will grow increasingly difficult to access remaining inventory for technical extraction reasons.

The U.S. Energy Information Administration says strategic petroleum reserve crude inventories fell to 282,983,000 barrels for the week ending Oct. 2, marking the lowest level since 1982. The reserve stood at 415,064,000 barrels before the Iran conflict began.

"There aren’t any more inventories to drain in the West," Russell Hardy, chief executive officer of Vitol Group, said at the Energy Intelligence Forum in London, according to Rigzone on Oct. 6. "We drained the available inventory." Vitol is the world’s largest independent oil trader.

"Hardy also warned that a tight fuels market is likely to persist in the coming months," continued Rigzone. "'Products are still in a very, very tight situation and that will probably roll forward for a little bit longer as we go through winter,' he said."

Rising oil prices tend to drive up mortgage rates because they're inflationary. Those rates are largely determined by a type of bond, the mortgage-backed security. And bond purchasers are wary of buying bonds when inflation is too warm because increasing prices eat into the value of the fixed incomes that bonds deliver.

The Refinery Problem

"'Consumers don’t buy crude oil. They buy gasoline, jet fuel and diesel,' Andy Lipow, president of Lipow Oil Associates in Houston, told The Wall Street Journal on Oct. 5. 'As a result of missile and drone strikes in the Middle East, several large refineries have been damaged. The world finds itself short of refined products.'

"The recovery in oil flows out of the Strait of Hormuz won’t fix the problem anytime soon," continued The Journal. Current flows include only about half the refined products that used to flow through the Strait: 11% of overall flows rather than the pre-war 20%+.

That's because many oil refineries in the Middle East are out of commission due to damage from the Iranian war. Unfortunately, the exact same thing is happening in Russia owing to airstrikes on its refineries by Ukraine. So, the world is very short of refined oil products.

Regardless of oil prices, the refinery crisis has so far translated into gas prices that are significantly higher than a month ago and dramatically higher than a year ago, alongside diesel prices that have been frequently setting new all-time highs (although both have fallen two or three cents a gallon over the last week). That's because a lack of refining capacity exacerbates rather than moderates supply issues for consumers and businesses, while demand remains fairly steady.

In his Substack post on Aug. 13, Nobel Prize-winning economist Paul Krugman backed up what we've been saying for some months. He referred to the "crack spread," which is the difference between the price of a barrel of crude oil and that for a barrel of "cracked" (aka refined) oil products, which he said had exploded by about $35 since the start of the Iran conflict.

"So while the price of a barrel of crude is up around $25, the price of the products refined from that barrel is up about 25+35=60 dollars per barrel," wrote Krugman.

Why? "The shortage of refining capacity has, in turn, held crude prices down: Buyers aren’t willing to pay extremely high prices for crude oil they can’t refine," continued Krugman. "Or to put it a different but equivalent way, the cutoff of oil shipments through the Strait of Hormuz in effect required a large rise in global oil prices to ration demand, but much of that rationing has taken place through a rise in the crack spread rather than a rise in crude oil prices."

On Sept. 23, Torsten Slok, Apollo's chief economist, explained in an e-newsletter why diesel is such an issue: "The US Gulf Coast diesel crack spread cleared $100/bbl for the first time on record in August against a normal range of $15 to $30," he wrote. "Unlike a gasoline spike, which lands on consumers as a one-time tax on discretionary spending, diesel is an intermediate input embedded in the delivered cost of nearly every physical good, from freight and rail to agriculture and construction.

"That means the rise in diesel prices does not stay in the energy line of the CPI [consumer price index] but migrates with a lag into core goods and services, which is exactly the kind of pass-through the Fed cannot dismiss as transitory," Slok continued. In other words, it creates sticky inflation that's hard to clean up.

The crack spread goes up and down, like oil and other commodity prices. On Oct. 12, RBN Energy put the crack spread globally (as opposed to the U.S. Gulf Coast specifically) at $64.55, pushing double the amount in August when Krugman did his calculations.

No wonder The Financial Times wrote on Oct. 8, "Crude futures [what most people call oil prices] are no longer a reliable guide to the inflationary impact of fuel prices."

Of course, any sudden good news from the Middle East could still send mortgage rates tumbling, regardless of that day's economic reports. Unfortunately, sudden bad news could — as we've seen all too often — send them higher.

Why bond markets act differently from stock markets

Mortgage rates are largely dictated by the yields on a type of bond, the mortgage-backed security (MBS). So, we focus on bond markets.

On May 7, The New York Times explored why stock markets and bond markets have been behaving so differently from each other since the start of the conflict in the Middle East.

Investors in stocks have been wagering that U.S. companies will continue to generate large profits during the conflict. And the stock market typically cares only about whether dividends and company values will continue to rise.

"But the bond market is another matter," said The Times. "Bond traders have maintained a much sharper focus on risk. Yields remain correlated with shifts in the price of oil. As oil prices have spiked and inflation has risen, yields have risen and bond prices, which move in the opposite direction, have fallen."

More recently, bond yields (and mortgage rates) have risen on concerns about the level of government debt, too.

Fifth Third Bank's Take on This Week's Inflation Reports

In an e-newsletter on Tuesday, Bill Adams, Fifth Third Bank's chief economist, shared his expectations for this week's inflation reports:

"CPI is expected to run hot again in September on rebounding gasoline prices. Higher fuel costs are likely to lift airfares, too, part of core CPI. Other components of core CPI are expected to run cooler. New and used vehicle prices are likely to be modestly lower as dealers discount to move inventories. Prices of most other durable consumer goods are expected to change little. Electronics may be an exception, if manufacturers pass on higher semiconductor prices to retailers and ultimately consumers. Shelter inflation could slow again, reflecting the lagged pass-through of tame increases of house prices and rents in 2025 and early 2026.

Adams thinks the producer price index (PPI), due Thursday, will probably be even higher than CPI because diesel rose more than gas in September and is more important for producer than consumer costs. Transportation and warehousing charges likely increased, too, boosting core PPI.

"If the inflation reports match expectations, they will likely reinforce financial markets’ view that the Federal Reserve is set to hold interest rates steady at the late October meeting, continued Adams. "The minutes of the prior meeting indicated that most FOMC members leaned toward an additional rate hike (i.e., one, not multiple) before year-end when they met in September. Several Fed policymakers made speeches after the decision where they tamped down on talk that the Fed could make a back-to-back hike in October."

Mortgage rates today

There are three economic reports on today's MarketWatch economic calendar. But the CPI is by far the most crucial and may well overshadow the others.

Inflation reports have four headline figures. Two relate to the reporting month (September, in this case), and the other two are year-over-year (YOY) numbers (Oct. 1, 2025-Sep. 30, 2026).

One for each period monitors all prices in the survey, and the other shows "core" CPI inflation, which is all prices excluding food and energy ones. Given the crucial role of gas prices (an energy product) in fueling recent inflation, core prices tend to move less quickly than all prices.

Here's what markets are expecting from today's CPI:

• September CPI — Markets expect all prices to have risen 0.6% during September, up from August's 0.4%
• September core CPI — Markets expect core prices to have risen 0.2% during September, down from August's 0.3%
• YOY CPI — Markets expect all prices to have risen 3.6% year over year, up from August's 3.4% YOY
• YOY core CPI — Markets expect core prices to have risen 2.5% year over year, up from August's 2.4% YOY

Typically, mortgage rates move higher on higher-than-expected inflation numbers and lower on lower-than-expected ones.

Today's other economic reports are the Fed's Beige Book, which is based on anecdotes gathered by district branches, and September's U.S. Treasury balance. The latter is expected to be a greatly reduced balance of -$29 billion, compared with August's -$167 billion.

Typically, mortgage rates move higher on better-than-expected data and lower on worse-than-expected numbers.

What's next?

Tomorrow brings retail sales data and the PPI, both for September. Both could affect mortgage rates, but other reports over the remainder of this week are unlikely to do so.