Mortgage Rates

The prior week showed a surprising display of inflation,  in that for consumers, it was less than expected. This is giving way to some optimism that inflation is on the right track to being under control.

On the other end of the spectrum, for producers, inflation had shown to be slightly higher than expected. But the far higher impact of the two reports is the Consumer Price Index. 

The Federal Reserve had still stuck to their stance as from the last FOMC opting to withhold any rate reduction decisions until late in the year, but the data coming in largely on a positive note has changed the previously highly negative outlooks into a neutral stance.

Consumer Price Index

The cost of consumer goods and services rose 0.3% in April, largely because of higher oil prices and housing costs, as inflation remained elevated in key parts of the economy. Yet the increase in the consumer price index last month fell below the 0.4% forecast of economists polled by The Wall Street Journal.

Producer Price Index

U.S. wholesale prices jumped 0.5% in April in another sign of sticky inflation. Economists polled by the Wall Street Journal had forecast a smaller 0.3% increase in the producer price index.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.10% with the current rate at 6.28%
• 30-Yr FRM rates are seeing a decrease by -0.07% with the current rate at 7.02%

MND Rate Index

• 30-Yr FHA rates are seeing no change for this week. Current rates at 6.62%
• 30-Yr VA rates are seeing no change for this week. Current rates at 6.64%

Jobless Claims

Initial Claims were reported to be 231,000 compared to the expected claims of 214,000. The prior week landed at 208,000.

What’s Ahead

Extremely light week ahead after the inflation data releases. Heading up the most influential releases, the FOMC minutes will be highlighting potential plans for the future of rate decisions, among the regular job data releases.

An extremely light week following the FOMC, with the only note-worthy reporting being the Consumer Sentiment reports from the University of Michigan, which gives a long term outlook of the consumer on the economy. The report has come in well under expectations, much more so than any previous release in the last 6 months. This is largely due to the increase in the cost of living for every sector.

Consumer Sentiment

The University of Michigan’s gauge of consumer sentiment fell to 67.4 in a preliminary May reading, down from 77.2 in the prior month.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.09% with the current rate at 6.38%
• 30-Yr FRM rates are seeing a decrease by -0.13% with the current rate at 7.09%

MND Rate Index

• 30-Yr FHA rates are seeing a -0.08% decrease for this week. Current rates at 6.62%
• 30-Yr VA rates are seeing a -0.08% decrease for this week. Current rates at 6.64%

Jobless Claims

Initial Claims were reported to be 231,000 compared to the expected claims of 214,000. The prior week landed at 208,000.

What’s Ahead

Next week we’re expecting new rounds of inflation data from CPI and PPI reports. Given the current data that has been released, the inflation problem is expected to still be a small sticking issue. 

Week in Review

With the passing of the Federal Open Market Committee rate decision panel, we now have definitively confirmed that the Federal Reserve intends to keep the rates at a two-decade high, for the sixth straight meeting by a unanimous vote. Jerome Powell had stated during the Q&A that they do not intend to cut rates until they have confidence that inflation will, “sustainably stay lower than the 2% objective.”

Lending partners have responded in kind by a rush in an increase of rates the last three weeks in a row, with expectations tempered about impending rate cuts any time soon.  Markets across the board have experienced a cooling off as a result. Manufacturing has seen a slow trend downwards since the start of the year as reflected in the recent PMI and ISM data releases.

FOMC

Federal Open Market Committee voted unanimously to leave the benchmark rate unchanged in the target range of 5.25%-5.5%. Decision is unanimous for the 15th straight meeting.

Consumer Confidence

Consumer confidence fell in April for the third straight month and touched a 21-month low due to the high cost of food and gas and fresh worries about the jobs market. The consumer-confidence index sank to 97.0 this month from a revised 103.1 in March, the Conference Board said Tuesday. That’s the lowest level since July 2022.

Chicago PMI

The Chicago Business Barometer, also known as the Chicago PMI, dropped sharply to 37.9 in April. That is the lowest level since November 2022.

ISM

The Institute for Supply Management said Friday that its service-sector PMI dropped sharply to 49.4% in April from 51.4% in the prior month.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.03% with the current rate at 6.47%
• 30-Yr FRM rates are seeing an increase by 0.05% with the current rate at 7.22%

MND Rate Index

• 30-Yr FHA rates are seeing a -0.25% decrease for this week. Current rates at 6.70%
• 30-Yr VA rates are seeing a -0.24% decrease for this week. Current rates at 6.72%

Jobless Claims

Initial Claims were reported to be 208,000 compared to the expected claims of 212,000. The prior week landed at 207,000.

What’s Ahead

An extremely light week following the FOMC. The only expectation is weekly jobless claims data and consumer credit reports. 

At Wednesday’s meeting, the Federal Open Market Committee (FOMC) is widely expected to maintain the current federal funds rate target range of 5.25% to 5.50%. This decision comes amidst conflicting economic signals. Tailing that, there is the Chicago PMI, Non-farm Payrolls, and the full release of the Consumer Confidence report. All of these are expected to match current economic conditions.

The prior week’s GDP numbers also factor into the equation, informing that economic growth has slowed this year compared to the previous year for Quarter 1. The PCE Index, the Federal Reserve’s preferred choice of inflation indicators, has shown inflation is within expectations but the whole picture is clear.

PCI Index

Prices in the U.S. jumped again in March based on the Federal Reserve’s preferred PCE index, signaling that progress on reducing inflation has stalled. The PCE index rose 0.3% last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a 0.3% gain.

GDP

Treasury Secretary Janet Yellen said Thursday that the U.S. economy is “firing on all cylinders” even as the GDP report showed economic growth coming in well below economists expectations.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.05% with the current rate at 6.44%
• 30-Yr FRM rates are seeing an increase by 0.07% with the current rate at 7.17%

MND Rate Index

• 30-Yr FHA rates are seeing a 0.03% increase for this week. Current rates at 6.95%
• 30-Yr VA rates are seeing a 0.02% increase for this week. Current rates at 6.96%

Jobless Claims

Initial Claims were reported to be 207,000 compared to the expected claims of 215,000. The prior week landed at 212,000.

What’s Ahead

Prior to the most recent data reports, there was high optimism that the Federal Reserve would cut rates this Wednesday. With a clear picture with data to back it up, those initial expectations have tempered significantly.

Last week, the largest report was the Federal Reserve’s Beige Book, leading into chairman of the Federal Reserve Jerome Powell speaking on the current state of the economy and the stance of the Federal Reserve. While the Beige Book has indicated some positive movement towards a strong economy, there have been many indicators from all inflation data that inflation has yet to be tamed to the standards of the Federal Reserve. 

This was punctuated by Jerome Powell, as he discussed at length the Federal Reserve has yet to feel inflation is under control. This has dispelled all notion there will be a rate cut in the future and likewise a strong reaction from lending partners and markets across the economy.

Beige Book

The U.S. economy grew slightly faster in the early spring and businesses added more workers, a Federal Reserve survey found, but there was little progress in lowering inflation.

The latest findings in the so-called Beige Book match the assessment of top Fed officials, who in recent weeks pointed to a strong economy and still-elevated inflation as a reason not to cut U.S. interest rates soon.

Jerome Powell on Inflation

Most recent data shows a lack of progress this year on reaching the Federal Reserve’s inflation goal, indicating that more time is needed before it can lower interest rates, Federal Reserve Chair Jerome Powell said Tuesday.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.23% with the current rate at 6.39%
• 30-Yr FRM rates are seeing an increase by 0.22% with the current rate at 7.1%

MND Rate Index

• 30-Yr FHA rates are seeing a 0.22% increase for this week. Current rates at 6.92%
• 30-Yr VA rates are seeing a 0.22% increase for this week. Current rates at 6.94%

Jobless Claims

Initial Claims were reported to be 212,000 compared to the expected claims of 215,000. The prior week landed at 212,000.

What’s Ahead

Three reports are set to take center stage. Another strong inflation indicator in the PCE Index & Prices, Consumer Sentiment from Univ. of Michigan, and Manufacturing PMI data. All which should give the final decision on whether the next Federal Reserve Rate Decision meeting will include a rate cut. There is very little expectation there will be a rate cut at this juncture.