Inflation Data on Target
- Mortgage Returns
- 2 hours ago
- 2 min read
Overview: Over the past week, investors were focused on major inflation data. The results were very close to expectations, and mortgage rates ended the week nearly unchanged.
The Consumer Price Index (CPI) is one of the most highly anticipated measures of inflation released each month. To reduce short-term volatility and get a better sense of the underlying inflation trend, investors generally look at core CPI, which excludes food and energy. In July, core CPI rose 0.3% from June, matching the consensus forecast. It was 3.1% higher than a year ago, up from an annual rate of increase of 2.9% last month and the highest level since February. Although this annual rate has dropped sharply from a peak of 6.6% in September 2022, it is still far above the readings around 2% seen early in 2021, which is the stated target level of the Federal Reserve.
Digging into the details of the report, investors were a bit concerned about the implications for future readings. While shelter (housing) costs continued to be the largest contributor to overall CPI gains, some smaller components highly affected by tariffs, such as home furnishings, rose sharply in July. Transportation, medical care services, and used vehicles also posted large increases. Investors are worried that higher tariffs will continue to exert upward pressure on prices going forward.
Homeowners looking to reduce their monthly payments boosted mortgage applications this week, according to the Mortgage Bankers Association (MBA). Refinance applications jumped 23% from last week and were 8% higher than one year ago. Purchase applications rose just 1% from the prior week and were up 17% from last year at this time. Of note, adjustable-rate mortgage applications increased to 25% of the total, the highest level since 2022.
Core CPI (annual % change)
Week Ahead
Aug. 14
Producer Price Index (PPI)
Aug. 15
Retail Sales report
Import and Export Price Indexes
Aug. 19
New Residential Construction report (also known as Housing Starts)