The upward trend that we’ve seen for rates over the last four weeks continued last week, according to the latest survey of average mortgage rates by Freddie Mac. Fortunately, the inflation data that came out last week – the PCE Index, which is the Fed’s favorite gauge of inflation – met expectations at 2.8 percent year-over-year.
As I’ve mentioned before, the Fed’s target for the inflation rate is 1-2 percent, so it’s not likely they will begin cutting rates until the rate drops down into their range, and it looks like conditions are headed in that direction. The latest estimate is that the Fed will eventually drop rates between 3 and 4 times, not likely starting until June or later.
Because of this estimate on the Fed’s next actions, the 10-Year Treasury Yield rose, thus pushing mortgage rates higher. For now, analysts are watching the 10-Year Yield and have deemed 4.32 percent as the next ceiling. Predictions are that if we see the 10-Year hit that level, it’s more likely mortgage rates will climb again. As of the writing of this newsletter, we hadn’t reached that point.
As for what I’m watching this week…
This week, the job market and various jobs reports will take center stage for data being released. The week culminates on Friday with the release of the government’s main Jobs Report on the nation’s employment picture.
On Wednesday, the ADP Employment Report on private sector job creation is first up. Forecasters see ADP’s February number for private sector job creation at 150,000. This would compare with the January growth in private payrolls reported by the Bureau of Labor Statistics of 317,000.
For the government’s main Jobs Report, a 190,000 rise is the call for new job growth in February versus 353,000 in January, which was far above expectations and included a sharp upward revision to December of 333,000.
Average hourly earnings, otherwise known as wage inflation, in February, are expected to rise 0.3 percent on the month for a year-over-year rate of 4.3 percent; these would compare with January’s higher-than-expected rates of 0.6 percent on the month and 4.5 percent on the year.
February’s unemployment rate is expected to hold unchanged at January’s 3.7 percent, which was lower than expected.
