Favorable Inflation Data by Igor Babamovski
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Favorable Inflation Data August 13, 2024 Overview: Over the past week, investors were focused on two key monthly inflation reports. In some good news for mortgage markets, all the data was in line with or below expectations, clearing the path for Federal Reserve rate cuts later this year. As a result, mortgage rates moved lower. The Consumer Price Index (CPI) is one of the most widely followed inflation indicators. To reduce short-term volatility and get a better sense of the underlying inflation trend, investors typically look at core CPI, which excludes the food and energy components. In July, core CPI was 3.2% higher than a year ago, which is down from 3.3% last month. It’s the lowest annual rate of increase since April 2021. Although this annual rate has fallen sharply from its peak in September 2022, it is still far above the readings around 2% seen early in 2021, which is the stated target level of the Fed. The primary reason is that shelter (housing) costs remain stubbornly