“You’re gonna hear me roar.” (Katy Perry) March may have come in like a lion, but consumer inflation was more of a whimper than a roar last month.

The Consumer Price Index (CPI) fell 0.1 percent in March, below the expected gain of 0.1 percent, the Bureau of Labor Statistics reported. Lower gas prices at the pump were to blame for the first decline in 10 months. When stripping out volatile food and energy prices, Core CPI was in line with expectations at 0.2 percent. However, Core CPI rose 2.1 percent on an annual basis, a 12-month high.

Inflation at the wholesale level was a bit hotter than expected, as the Producer Price Index (PPI) and Core PPI both rose 0.3 percent in March, versus the 0.2 percent expected.

Though inflation remained tame in March, the minutes from the Fed’s March meeting showed that the Fed still expects inflation to rise this year. Inflation hurts the value of fixed investments like mortgage bonds, meaning a rise in inflation can cause bonds to worsen. Home loan rates are tied to mortgage bonds, so a rise in inflation can cause rates to rise as well.

Geopolitical headlines also garnered attention in the latest week, as heightened tensions over Syria between the U.S. and Russia helped bonds benefit temporarily from safe-haven trading. Earnings season also began, and there is a growing sense that corporate earnings for the first quarter could be strong due to the tax cuts. This could benefit stocks at the expense of mortgage bonds and home loan rates.

For now, mortgage bonds are trapped in a sideways trading pattern that began in mid-February. Home loan rates remain just above all-time lows.

Retail sales, housing news and manufacturing data highlight the week’s busy economic calendar.

  • Economic data kicks off on Monday with the closely watched Retail Sales report.
  • Also on Monday, look for housing news via the NAHB Housing Market Index. Housing Starts and Building Permits follow on Tuesday.
  • Manufacturing numbers will be delivered Monday via the Empire State Index. Look for the Philadelphia Fed Index Thursday.
  • As usual, weekly Initial Jobless Claims will be reported on Thursday.

If you or someone you know has any questions about rates or home loans, please get in touch. I’d be happy to help.

Related Articles

The economic data coming out of the US this week showed that not only is a recession highly unlikely anytime soon, but the economy is actually reaccelerating from the slowdown seen last Fall. Back in October and November, the Fed was very hawkish and suggested that three rate hikes would…
Read More of the post Fed Sparks Economic Reacceleration

Initial Jobless Claims is a weekly report that tracks how many people have filed for unemployment benefits. It is both a solid gauge on the state of the labor market and economy, and a leading indicator on what to expect in the months ahead. So, what are Initial Jobless Claims…
Read More of the post Let the Good Times Roll

"It's getting better all the time" (The Beatles) That is the best way to describe the current home loan rate environment. This past week we saw mortgage rates experience their largest one-week decline in 10 years! What caused the sharp decline in home loan rates? Recessionary fears, and the likelihood…
Read More of the post Yield Curve Inversion Explained

The monetary authority of the United States, the Federal Reserve, meets 8 times a year to discuss the economy and adjust monetary policy to promote maximum employment and maintain price stability (inflation). The Fed, led by Chairman Jerome Powell, met this past Wednesday and decided to leave the Fed Funds…
Read More of the post Thank You, Mr. Powell