Highest Point Of Activity On Mortgage Rates Along With Inflation

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Highest Point Of Activity On Mortgage Rates Along With Inflation

Jan 20, 2023 | News | 0 comments

Monthly readings of the Consumer Price Index indicate that inflation has peaked. Mortgage rates should also have reached their highs at this point.

It would be lower today on a year-over-year basis if not for the lagging CPI shelter index, which accounts for the majority of the headline core print. The fact that most people are aware of shelter inflation is a positive thing because it demonstrates how low headline year-over-year prints are currently.

While inflation continues to rise, the growth rate is slowing year-over-year.

In Thursday’s jobless claims report, the headline number of 205,000 was still solid, while the four-week moving average was 212,500.

This indicates that mortgage rates are improving today. When mortgage rates peaked at 7.37% last year, people were predicting 8%-10% mortgage rates, but we are now closer to a five-handle in mortgage rates.

As shelter inflation always lags behind current data, let’s wait until October 2023 when the data line peaks and follows the more current data. It will lead to more noticeable drops in core CPI when that happens. For now, shelter data shows a hot growth rate.

Food inflation appears to be peaking; we all know the effects of the bird flu on egg prices, and the Fed cannot do anything about them. Inflation in the food sector is part of headline inflation, which has a wild swing up and down, which is why the Fed doesn’t pay attention to it.

There is a possibility that the Federal Reserve will ultimately catch up with the bond market, as it always does. Nevertheless, rates are currently declining, and the fear of 8%-10% mortgage rates for the spring of 2023 is slowly dying, as was the fear of inflation in the 1970s.