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Mortgage Rate Watch: Keeping an Eye on Inflation and October Retail Sales
For mortgage rate watchers, this is a busy week. Attention is focused on three key reports: tomorrow’s Producer Price Index (PPI), Thursday’s Consumer Price Index (CPI), and October retail sales.
The PPI measures inflation at the wholesale level, while the CPI reads inflation at the retail/consumer level. Both indices have an overall rate and a core rate that excludes volatile food and energy components. The bond market and mortgage rates will react to the difference between the expectation and the figures that actually materialize. The market is looking for an .2% increase in the overall and the core rates. If the rate is higher than that, mortgage rates will rise. A lower figure will suggest little threat of inflation and open the door for further Fed rate cuts.
If October retail sales disappoint, it will add to the dreary forecasts for Christmas sales and consumer spending. Since consumer spending is said to make up 2/3s of the economy, any sign that the consumer is running out of gas worries the market. Meanwhile, the benchmark 10 yr Treasury note yield fell to 4.266%, its lowest level in two years. Mortgage rates are most closely associated with this particular Treasure security.
Stay tuned…..