POST TAGSMarket Updates
Blog posted On August 14, 2023
Last week, rates trended higher despite some friendly inflation news from the consumer price index (CPI). Though it’s not always the case, higher inflation levels have correlated to higher rates over the past year. But there was some hopeful news for rates and housing last week as well. Let’s break it down.
Why rates trended higher after last week’s inflation news
Inflation was largely lower than expected last week. So why did rates trend higher? There’s no one singular reason why rates trended higher. But are a few culprits that might have contributed to the climb:
There were some costs that weren’t included in July’s CPI that many fear will be accounted for in August’s report and consequently push those inflation numbers higher: Oil increased 16% and gas increased 8%
Mary Daly, San Francisco Fed President, reacted to the inflation numbers by saying the Fed “has more work to do.” This might have led the markets to believe the Fed is misinterpreting the inflation data and not accounting for the lag of shelter costs. If the Fed misinterprets the data it could raise rates again.
This essentially means that their goal has been to bring inflation down (by raising the benchmark interest rate) without causing economic distress (which would have caused lower rates sooner)
How the inflation report might signal hope for rates and housing
Earlier last week, the Federal Reserve of San Francisco released a report titled, “Where is Shelter Inflation Headed?” In the report, there were a few key details that shed some light on inflation, rates, and shelter costs that could offer you some hope in the current market.
As always, let us know if you have any questions!