Consumer Inflation Below Expectations

Last Week in Review:
Consumer and wholesale inflation were tame in April, while geopolitical events also made headlines.

The Consumer Price Index (CPI) rose 0.2 percent in April, just below expectations, the Bureau of Labor Statistics reported. This was down from the 2018 high of 0.5 percent recorded in January. The numbers revealed an uptick in energy and food prices which was offset by a decline in demand for used cars and trucks. The Core CPI, which strips out volatile food and energy prices, rose 0.1 percent, also below expectations.
Inflation at the wholesale level was also tame in April as the Producer Price Index (PPI) rose 0.1 percent. Core PPI rose 0.2 percent, as expected.
Tame inflation is typically good for Mortgage Bonds, as well as the home loan rates tied to them, because inflation reduces the value of fixed investments like Bonds. And Mortgage Bonds were boosted by the tame inflation data in the latest week.
It's also important to remember that many factors impact both Stocks and Bonds. Strong economic news can benefit Stocks (sometimes at the expense of Bonds), while geopolitical turmoil can have the opposite effect. Stocks received a boost in the latest week when energy Stocks lifted the entire market, as oil prices spiked after President Trump announced his decision to withdraw from the Iran nuclear deal. The release of prisoners from North Korea and the scheduling of a meeting between President Trump and Kim Jong-un also lifted some uncertainty and helped the recent rise in Stock prices.
Investors will be watching headlines from the Middle East and Korea closely in the coming weeks as they decide where to put their investing dollars.
For now, though, home loan rates have trended higher this year, they remain attractive and near historically low levels.
If you or someone you know has any questions about home loans, please contact us. We'd be happy to help.