This week, the Core Consumer Price Index showed inflation on the rise. Overall, this reflected negatively for mortgage rates.
Meanwhile, highly anticipated testimony from Fed Chair Powell caused some volatility. However, comments created a small net effect. As a result, rates ended the week higher.
Core Consumer Price Index Rose
In June, the Core Consumer Price Index (CPI), which excludes the volatile food and energy components, rose 0.3% from May. In conclusion, Core CPI jumped above the expected increase of 0.2%.
Also, Core CPI increased 2.1% higher than a year ago, up from an annual rate of increase of 2.0% last month. Higher inflation erodes the future buying power of money. Due to this, the Core CPI report created a negative impact for bonds and mortgage-backed securities (MBS).
Fed Chair Testimony Reinforces Rate Cut Outlook
Aside from the Core Consumer Price Index, the head of the Federal Reserve provides an update to Congress twice per year. He then answers questions from lawmakers. During this week’s testimony to the Finance Committee, Fed Chair Powell reinforced the investor outlook for a rate cut at the next meeting on July 31st.
According to Powell, second quarter U.S. economic growth “appears to have moderated”. Potential risks include slowing business investment, uncertainty about global economic activity, and trade tensions. He said that the Fed will “act as appropriate” to sustain the current expansion. Overall, his comments fell in line with expectations. Investors wonder whether there will be additional rate cuts later in the year.
Looking Ahead After Core Consumer Price Index Report
After the Core Consumer Price Index report, investors look ahead towards Tuesday’s Retail Sales data. Consumer spending accounts for about 70% of all economic activity in the U.S. That said, the retail sales data indicates growth.
Industrial Production, another important indicator of economic growth, also comes out on Tuesday. Housing Starts release on Wednesday. In addition, news about the trade negotiations holds influence over mortgage rates.
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.