Market Update: Hopes of a May Rate Cut Dwindle After Hot Inflation News

Blog posted On February 13, 2024

January’s consumer price index came in hotter than expected this morning, causing stocks and mortgage bonds drop. Mortgage rates have the inverse reaction of mortgage bonds, so it’s likely that rates will trend higher. Looking long-term, experts are speculating that this higher inflation report could impact the possibility of a rate cut in May.

Inflation disappoints, but has some silver linings

The consumer price index climbed 0.3% month-over-month in January, which was higher than the 0.2% expected. Annually, inflation fell from 3.4% to 3.1%, but experts were expecting it to be at 3%. Core inflation, which strips food and energy, was at 0.4% month-over-month, which was higher than the 0.3% expected. Annual core inflation was at 3.9% vs. the 3.7% expected. Here’s why the numbers came in where they did:

Coming up this week

The National Association of Home Builders (NAHB) is releasing the home builder sentiment index later this week. It’s expected to rise. Housing starts and building permits are also scheduled for release. They’re both expected to rise.

Reach out if you have any questions.

Sources: Bloomberg,  MBS Highway