As the latest core CPI report reflects steady inflation, investors received little major news from this week’s Fed meeting. After a quiet week, mortgage rates ended with little change.
Core CPI Reflects Steady Inflation
Analysts widely follow the Consumer Price Index (CPI) as a monthly inflation report. CPI measures the price change for goods and services. Most investors look at Core CPI. Moreover, Core CPI excludes the volatile food and energy components. In doing so, Core CPI provides a clearer indication of the underlying trend.
The latest Core CPI report reflects steady inflation for most of 2018. In December, Core CPI rose 0.2% from November. This matched the consensus forecast. Core CPI increased 2.2% higher than a year ago. Therefore, Core CPI met same annual rate of increase as last month. Overall, Core CPI neared the Fed’s stated target level of 2.0%.
Fed Meeting Provides Little Clarity
Aside from Core CPI reflecting steady inflation, analysts looked to the release of the latest Fed meeting minutes. Released on Wednesday, the December 19th Fed meeting showed consistency according to recent comments from Fed officials. The Federal Reserve supports the notion that they are open to slowing the pace of monetary policy tightening based on future economic conditions.
According to the minutes, the “extent and timing of further policy firming” is “less clear” due to recent financial market volatility and signs of slowing economic growth. This message eased investor concerns that the Fed might mistakenly tighten too quickly.
Regarding the Fed’s reduction in its roughly $4 trillion in holdings of Treasuries and mortgage-backed securities, Fed Chair Powell on Thursday said that the final size of the balance sheet will be “substantially smaller than it is now,”. However, Fed Chair Powell declined to provide a less ambiguous figure. He elaborated that a “more normal level” would be no larger than the size needed to conduct monetary policy. Investors hope for more precise guidance in the future.
Looking Ahead After Core CPI Reflects Steady Inflation
Looking ahead after Core CPI reflects steady inflation, Retail Sales release on Wednesday. Consumer spending accounts for about 70% of all economic activity in the United States. Thus, the retail sales represents a key growth indicator.
Also, Housing Starts come out on Thursday. Industrial Production, another important indicator of economic activity, publishes on Friday.
As of December 22nd, the United States government shutdown. Because of this, economic reports face delays and continue to do so throughout the shutdown’s duration. Generally, no one knows when the impacted data will be ready to be released.
Want to see how mortgage-backed securities change when Core CPI reflects steady inflation? Never miss an update with MBSQuoteline. To receive by-the-minute updates on mortgage-backed securities, try our platform free for 14 days.
Stay connected with MBSQuoteline on social media by following us on Facebook, Twitter, and LinkedIn.
All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission. To learn more about the MortgageTime™ newsletter, please contact MBSQuoteline at 800.627.1077 or info@mbsquoteline.com.