Wednesday morning started out with the May CPI report (Consumer Price Index) and it came out better than expected. The overall inflation report showed 0% for the month, which was less than estimates of .01%. Year over year inflation numbers also decreased from 3.4% to 3.3%, which was also better than expected. The immediate reaction in the mortgage bond market was positive, which helps mortgage rates.
The day finished with the end of the Fed meeting. After the employment numbers from last week, many expected the Fed to make changes to their statement that could hurt interest rates. With the May CPI report, there was hope that the Fed would continue with the plan of two rate drops this year. However, when the meeting ended and Chairman Powell gave his speech, it was not what we hoped for. The Fed held rates steady which was expected, but they revised their outlook for rate cuts to just one in 2024. They admitted that there was modest progress to reaching it’s 2% inflation objective, but it didn’t have the confidence to cut rates yet. Powell said it’s too soon to tell if the Fed policy is sufficiently restrictive. The Fed wants to see more progress to getting inflation down to the 2% goal before they are willing to cut interest rates.
Wednesday’s bond market started out very good but ended giving back a lot of the gains from earlier in the day. When we see the Personal Consumption Expenditures price index for May, we’ll see where that shows inflation at. The PCE is the Fed’s preferred inflation gauge, so we’ll see where May’s numbers come in on that report. In the beginning of 2024, the markets expected several rate cuts and with inflation not moving fast enough, that has not happened.
For now, interest rates are stable, a bit lower than they were a couple months ago. As many of us have said, if you are thinking about buying a home, look now – if you find something you like, buy it! You can always refinance to lower the rate, but home prices are still expected to increase over time.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
