Mortgage Rates

The week for the Federal Reserve’s rate decision has finally come. This is the week everyone has been waiting which will decide whether we will see any rate cuts this year. There has been a lot of speculation that this will be the first rate cut and likely more in the future. With the Federal Reserve giving hints the data has been on track, the outcome of one seems very likely. With the previous week’s CPI and PPI statistics coming in, which both were slightly warmer than expected, the data still largely shows that inflation has been kept under control. This may affect the decision, but ultimately throughout the year, the data has been consistent with few surprises. The week rounded out with the Consumer Sentiment data reports showing favorable results, indicating that the current state of the economy is in a neutral position in the eyes of the average consumer.

Producer Price Index

U.S. wholesale prices showed a mild increase in August and reinforced the idea the rate of inflation is returning to low pre-pandemic levels. The moderate increase in wholesale costs follows a similarly mild rise in consumer prices last month. With inflation slowing, the Federal Reserve is widely expected to cut interest rates next week.

Consumer Price Index

The consumer price index rose a mild 0.2% in August, the government said Wednesday, in line with The Wall Street forecast. Yet a measure of prices that strips out volatile food and energy costs, known as the core rate, rose a somewhat stiffer 0.3%. That was a tick above the forecast and matched the biggest increase in five months.

Consumer Sentiment

The rise in sentiment, 0.54%, is the highest since May. Consumer sentiment rose to a four-month high in September, just ahead of the U.S. presidential election, as expectations about future inflation fell to the lowest level since 2020. Yet Americans are still “guarded” in their views about the economy.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease of –0.20% with the current rate at 5.27%
• 30-Yr FRM rates saw a decrease of -0.15% with the current rate at 6.20%

MND Rate Index

• 30-Yr FHA rates saw a 0.01% increase for this week. Current rates at 5.68%
• 30-Yr VA rates saw no change for this week. Current rates at 5.69%
  

Jobless Claims

Initial Claims were reported to be 232,000 compared to the expected claims of 230,000. The prior week landed at 228,000.

What’s Ahead

The FOMC Rate Decision will take place on Sunday of this upcoming week. 

This week, the most important release of the year regarding inflation data will occur. Once again the CPI and PPI take the front stage clearing the way for rate cuts made by the Federal Reserves. Based on several indicators, there is strong confidence that if the upcoming inflation data meets expectations, we could see interest rate cuts before the year ends. In addition to the inflation data, the Consumer Credit reports will be released early this week. Both lending partners and the broader market have high expectations for these reports.

The previous week’s employment data also had a lot of positive things to say, with wages growing faster than inflation. The overall economic outlook has been positive.

U.S. Trade Deficit

The U.S. international trade deficit widened 7.9% in July to $78.8 billion from a revised $73 billion in the prior month, the Commerce Department said Wednesday. This is the largest monthly trade gap since June 2022.

Federal Reserve Beige Book

Nine out of 12 Federal Reserve regional districts reported flat or declining economic activity in August, according to the central bank’s so-called Beige Book report released on Wednesday. That’s up from five districts that reported weak conditions in the last report in mid-July. The four districts that have experienced weaker conditions than in the prior report appeared to be Philadelphia, Richmond, Atlanta, and St. Louis.

U.S. Employee Earnings

Real average hourly earnings for all employees increased 0.1 percent from June to July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from an increase of 0.2 percent in average hourly earnings combined with an increase of 0.2 percent in the Consumer Price Index for All Urban Consumers (CPI-U).

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease of –0.04% with the current rate at 5.47%
• 30-Yr FRM rates saw no change this week with the current rate at 6.35%

MND Rate Index

• 30-Yr FHA rates are seeing a –0.15% decrease for this week. Current rates at 5.67%
• 30-Yr VA rates are seeing a –0.14% decrease for this week. Current rates at 5.69%
  

Jobless Claims

Initial Claims were reported to be 232,000 compared to the expected claims of 230,000. The prior week landed at 228,000.

What’s Ahead

The upcoming CPI and PPI reports are the most critical releases of the year and will play a decisive role in shaping the interest rate cuts for the remainder of the year.

With the PCE Index data coming in as exactly as expected and the Federal Reserve signaling a strong potential for a rate cut, there is much optimism we will be seeing a rate cut this year if not the start of the next year. Among the PCE inflation data reports were the GDP initial figures, which projected the economy has grown faster than expected. Additionally, Personal Income data has also grown faster than expected. Both are very positive signs with inflation finally showing signs of flagging after in part due to the Federal Reserve’s aggressive monetary policy.

GDP (2nd Revision)

The U.S. economy grew at a 3% annual pace in the second quarter instead of the 2.8% rate originally estimated, revised government data released Thursday show. Economists polled by the Wall Street Journal were expecting second-quarter GDP to be unrevised at 2.8% rate.

PCE Index

Core personal consumption expenditures prices increased 0.2% in July and 2.6% from a year ago. The 12-month figure was slightly softer than the 2.7% estimate. All-item inflation came in respectively at 0.2% and 2.5%, in line with forecasts. Personal income increased 0.3%, slightly higher than the 0.2% estimate, while consumer spending rose 0.5%, in line with the forecast.

Consumer Sentiment

The second and final reading of the University of Michigan’s U.S. consumer-sentiment index in August rose slightly to 67.9 from a preliminary 67.8 released earlier in the month, the University of Michigan said Friday. Economists polled by the Wall Street Journal had expected sentiment to improve slightly to a final reading of 68. The index was 66.4 in July.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates seeing a week-to-week decrease by -0.11% with the current rate at 5.51%.
• 30-Yr FRM rates seeing a week-to-week decrease by -0.11% with the current rate at 6.35%

MND Rate Index

• 30-Yr FHA rates are seeing a -0.08% change for this week. Current rates at 5.82%
• 30-Yr VA rates are seeing a -0.09% change for this week. Current rates at 5.83%

Jobless Claims

Initial Claims were reported to be 232,000 compared to the expected claims of 230,000. The prior week landed at 228,000.

What’s Ahead

Only one important data release next week. The one to look for is the Non-farm Payrolls which has always been a strong indicator of whether wages have been keeping up with the rate of inflation.

Last week’s light release schedule suggests that the Federal Reserve may be planning to cut rates this year, as most inflation data align with this expectation. This week, the only notable releases are the minor FOMC Minutes and the U.S. leading economic indicator index. While these indicators came in slightly worse than expected, the results are not significant enough to impact the upcoming rate decision.

U.S. Leading Indicators

The leading index for the economy fell 0.6% in July, the fifth straight monthly decline, the Conference Board said Monday. Economists polled by the Wall Street Journal had forecast a 0.4% decline.

FOMC Minutes

“Several” top Federal Reserve officials were ready to cut interest rates in July and most believed a reduction next month is justified in light of slowing inflation and a weakening jobs market, new documents show. “The majority overserved that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” the minutes of the Fed’s July 30-31 meeting said.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease this week by -0.04% with the current rate at 5.62%
• 30-Yr FRM rates are seeing a decrease this week by -0.03% with the current rate at 6.46%

MND Rate Index

• 30-Yr FHA rates are seeing a -0.20% decrease for this week. Current rates at 5.90%
• 30-Yr VA rates are seeing a -0.20% decrease for this week. Current rates at 5.92%

Jobless Claims

Initial Claims were reported to be 232,000 compared to the expected claims of 230,000. The prior week landed at 228,000.

What’s Ahead

The Federal Reserve’s preferred inflation data report is heading up the pack with the PCI Index releasing at the tail end of the week, headed up by Personal Income and Consumer Confidence reports before that. The PCE Index data will be the strongest motivator for a soon-to-be rate cut.

The results are in, and both the CPI and PPI inflation reports confirm that inflation has come in lower than expected, surpassing expectations. This is a great result leading forward for the next FOMC Rate Decision meeting, as there is high optimism now that the rate cuts are coming this year. With next week’s FOMC Minutes guiding the next meeting, we can expect to hear their stance going forward. We also see a matching indicator in Retail Sales, showing a significant gain across the board, while auto sales had the largest increase in one and a half years. This aligns with previous consumer confidence reports and will serve as a good reference when making the next rate decision for the Federal Reserve.

Consumer Price Index

Inflation stays mild; the 2.9% annual pace is at its lowest since March 2021. The bulk of inflation in July was concentrated in housing; accounting for 90% of the increase in the consumer price index. Energy and food were on the tamer side. Energy prices were flat and the cost of food rose 0.2%.

Producer Price Index

In July, the Producer Price Index (PPI) for final demand increased by 0.1 percent.eh Prices for final demand goods moved up 0.6 percent, and the index for final demand services fell 0.2 percent. Over the 12 months ending in July, the overall prices for final demand increased by 2.2 percent. Wholesale inflation shows few warning signs. Fed interest-rate cut is still on track.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.03% with the current rate at 5.66%
• 30-Yr FRM rates are seeing an increase by 0.02% with the current rate at 6.49%

MND Rate Index

• 30-Yr FHA rates are seeing a 0.01% increase for this week. Current rates at 6.10%
• 30-Yr VA rates are seeing a 0.02% increase for this week. Current rates at 6.12%

Jobless Claims

Initial Claims were reported to be 227,000 compared to the expected claims of 234,000. The prior week landed at 233,000.

What’s Ahead

With only the FOMC Minutes coming up next week, the rest of the week has a notably light schedule. However, the regular weekly reports are still expected to be delivered as usual.