Mortgage Rate Update October 15, 2015

Mortgage rates continue to trade sideways.

We know that the Fed is waiting for signs of inflation before they proceed with raising short-term interest rates.  So will inflation begin to rear it’s head anytime soon?

Yesterday, the Producer Price Index (PPI), which reports on price pressure in the wholesale/ manufacturing level of our economy, was tepid.  When you strip out volatile food & energy prices the core PPI increased by only .8% year-over-year.  Following the release of the report the yield on the US 10-year treasury note fell to 1.98%.

Today, the Consumer Price Index (CPI), which reports on price pressure at the retail level of the economy, was a little livelier but still below the Fed’s target of 2.00%.  The headline CPI figure fell by .2% from last month.  When you strip out volatile food and energy prices year-over-year prices increased by 1.9%.  On a side note, based on the results in this report social security recipients will not be receiving a cost of living adjustment for 2016 (this is only the third time in the past 40 years this has happened).

From a technical perspective rates now look vulnerable to a modest increase.  The last two times that the yield on the US 10-year touched 2.00% o below they moved higher in the following trading sessions.

Current Outlook: locking