While CPI data has come in within expectations for current inflation, inflation remains much higher than in previous years. The rate is holding steady at 2.4%, which is above the Federal Reserve’s 2.0% target.
There are sectors where cost has seen significant increase and has not been reflected in the CPI due to the more recent changes implemented by the Trump administration. Fuel costs, for example, have seen an upward year-over-year trend that has been exacerbated by the recent war in Iran.
The Fed Beige Book and balance sheet have also shown steady growth and an upward trend as of late. Despite inflation data running counter to this idea, there are still widespread expectations that rates will be cut again.
Consumer Price Index
Consumer prices increased 0.4% in August, while core CPI rose 0.3%. Annual inflation remained at 3.4%, with core inflation easing to 2.4%. While underlying inflation continues to move closer to the Federal Reserve’s 2% target, the monthly increase suggests that inflationary pressures remain persistent.
Producer Price Index
Producer prices increased 0.4% in August, while prices for goods rose 1.1% and services increased 0.1%. Producer prices were up 5.4% from a year ago, indicating continued wholesale inflation pressure. Core PPI, excluding food and energy, increased 0.2% for the month and 4.6% year over year. The stronger headline reading could make the Federal Reserve more cautious about future rate cuts, potentially putting upward pressure on mortgage rates.
Primary Mortgage Market Survey Index
- 15-Year FRM rates saw an increase of 0.05%, bringing the current rate to 6.09%.
- 30-Year FRM rates saw an increase of 0.05%, bringing the current rate to 6.76%.
MND Rate Index
- 30-Year FHA rates saw an increase of 0.24%, with current rate at 6.68%.
- 30-Year VA rates saw an increase of 0.24%, with current rate at 6.70%.
Jobless Claims
Initial Claims were reported to be 206,000 compared to the expected claims of 200,000. The previous week landed at 209,000.
What’s Ahead
FOMC is holding an economics projection meeting which should provide forward guidance on policy. Additionally, the Federal Reserve Interest Rate decision happening mid-week, making for a very light week.