Rates this week…

Inflation shows continued improvement, but is it enough?

The May Consumer Price Index (CPI) report showed that overall inflation increased by 0.1%, which was even lower than estimates of 0.2%. Year over year, inflation declined from 4.9% to 4%, which was lower than the 4.2% expected. Inflation has declined sharply from the 9.1% peak and continues to make progress every month since that peak.

The main focus is the Core rate, which strips out food and energy prices, and it increased by 0.4%, which was in line with expectations. Year over year, Core CPI decreased from 5.5% to 5.3%, which was also lighter than estimates, although declining at a slower pace than the Fed would like.

Fed pauses after 15 months of rate hikes

It finally happened: The Fed declined to raise interest rates at its policy meeting for the first time since March 2022. The last 15 months saw the sharpest series of rate hikes in 40 years — radically reshaping markets and the economy. Now, it might be the beginning of the end of that era.

• Mortgage rates soared from roughly 3% at the beginning of 2022, to more than 7% at times, drastically reducing affordability and slamming the brakes on home sales activity.

It's unclear if all that interest-rate-related tumult is over. In announcing its decision not to lift rates, the Fed's rate-setting committee hastened to say it could return to rate hikes if inflation doesn't continue to drop. "It may make sense for rates to move higher, but at a more moderate pace," Fed chair Jerome Powell told reporters.

More notes…

MBA: Mortgage rates to fall - During the National Association of Real Estate Editors' annual conference, Joel Kan, the deputy chief economist of the Mortgage Bankers Association (MBA), shared that the MBA expects loan rates to average 5.6% by year-end.

Buyer activity remains strong: according to Redfin, over 33% of transactions have been sold over asking price.

Labor market showing weakness: Both this week and last, jobless claims came in at the highest levels since late 2021. If we consider that claims were still on the way down from their post-Covid explosion in 2021, it's just as fair to say that claims are the highest since 2017

Happy Father’s Day!

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