Although mortgage rates have remained in a rather narrow range throughout the beginning of this year, we’ve seen a great deal of volatility as interest rates in the larger economy have moved all over the place since 2024 started.
What’s going on that’s driving this volatility?
By the looks of it, much of the volatility is mirroring the economic readings we’re seeing. Also, as you know, the actions and plans of the Fed will affect the direction of rates. These two factors alone, and the uncertainty they bring to the markets, will likely continue to cause a certain measure of volatility going forward.
Specifically talking about the Fed, there have been numerous Fed members speaking in public and tamping down hopes of a rate cut as early as March, as was once thought. They are now saying that any rate cut wouldn’t come til summer at the earliest. Strong economic data has them worried that a rate cut would kick up the heat in the economy too fast and send inflation on the rise again.
Our nation’s debt load continues to be a headwind in the markets as the Treasury Department continues to sell billions of dollars worth of debt. In fact, last week, they sold the largest auction size of 10-year Notes in the history of the country! With the increased debt comes increased interest rates demanded by creditors, and those rates will also cap the improvement that mortgage rates will be able to drop to.
As for what’s coming up this week…
Our most important inflation number for the consumer level came out this week. The latest CPI (consumer price index) revealed overall prices rose 0.3 percent, more than the 0.2 percent expected. Annual rates, which in December were 3.4 percent overall, were expected to slow to 3.0 but came in at 3.1 percent. Still headed in the right direction, but not as quickly as anticipated.
The companion report on wholesale prices – the PPI (producer price index) – comes out on Friday. Producer prices in January are expected to rise 0.1 percent on the month, same as the prior month. The annual rate in January is seen at 0.7 percent versus December’s 1.0 percent rise, which, like the monthly rate, was lower than expected.
We’ll see how retail sales are doing as the latest numbers come out on Thursday. January sales are expected to fall 0.1 percent versus December’s slightly better-than-expected 0.6 percent gain. Retail sales have beaten consensus numbers in the last six reports.
The only housing data of note comes out on Friday. The New Housing Starts and Building Permits report is expected to reveal housing starts in January are holding mostly steady at a 1.47 million annual rate versus December’s 1.46 million. Permits, at 1.5 million in December, are expected to rise to 1.510 million.
I’ll keep an eye on all of it for you and report back next week!
