Overview: With major economic data and the ongoing focus on tariff policies, mortgage markets remained volatile over the past week. The latest inflation report was weaker than anticipated, while the labor market data was very close to expectations. Despite the favorable news on inflation, however, mortgage rates ended the week nearly unchanged.
The Consumer Price Index (CPI) is one of the most closely watched inflation indicators released each month. To reduce short-term volatility and get a better sense of the underlying inflation trend, investors look at core CPI, which excludes food and energy. In February, core CPI was 3.1% higher than a year ago, down from an annual rate of 3.3% last month. This was below the consensus forecast and the lowest annual rate since April 2021. Although this annual rate is down significantly 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. Shelter (housing) costs continue to be a primary reason why inflation remains stubbornly elevated. Large increases also were seen in used vehicle prices, apparel, and motor vehicle insurance, while airline fares declined sharply in February.
The highly anticipated Employment Report released on Friday was essentially in line with the anticipated levels and had little impact on mortgage rates. The economy gained 151,000 jobs in February, close to the consensus forecast of 160,000. The strongest sectors included health care, financial, and transportation. The unemployment rate increased from 4% to 4.1%. Average hourly earnings, an indicator of wage growth, were 4% higher than a year ago, down from an annual rate of 4.1% last month.
Economic events in Europe also received some attention over the past week. On Thursday, the European Central Bank reduced benchmark interest rates by 25 basis points. This move was widely expected, causing little reaction. A policy change in Germany caught investors off guard, however. The German government announced plans to allow higher fiscal spending to help increase economic growth. Since faster growth increases inflationary pressures, global bond yields climbed after this news.
Core CPI (annual % change)
Week Ahead
March 13
Producer Price Index (PPI)
March 17
Retail Sales report
March 18
New Residential Construction report (also known as Housing Starts)
Import and Export Price Indexes
March 19
Federal Reserve meeting (No rate changes expected)
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