“Got the inflation blues.” (B.B. King) Small business optimism may be near record highs, but signs of inflation could cause some to sing the blues.

Consumer Price IndexThe Consumer Price Index (CPI) rose 2.9 percent in the 12 months ending in June, up slightly from the 2.8 percent annual reading in May. This was the largest annual increase since the year ending in February 2012, and it was led higher by energy costs. On a monthly basis, CPI increased 0.1 percent in June. Core CPI, which strips out volatile food and energy prices, rose 0.2 percent in June and was up 2.3 percent year over year.

The Producer Price Index (PPI), which measures wholesale inflation, rose 3.4 percent year over year in June, the largest increase in more than six years. The rise was also due in part to increasing energy prices. From May to June, PPI was up 0.3 percent.

Rising inflation is always a concern for fixed investments, like Mortgage Bonds, since inflation reduces their value. Home loan rates are tied to Mortgage Bonds, so they are negatively impacted when Mortgage Bonds worsen. However, many factors influence the markets. For example, if trade issues heat up, Bonds could benefit at the expense of Stocks if investors seek a safer haven for their money.

In the latest week, Stocks benefited from positive earnings and the news that the NFIB Small Business Optimism Index remained near record highs in June. Mortgage Bonds and home loan rates remain attractive and near their best levels historically.

Reports on housing, manufacturing and retail spending could impact the markets. Also, Fed Chair Powell will give his semi-annual testimony on the state of the U.S. economy to Congress on Tuesday and Wednesday, which could sway trading.

  • The closely-watched Retail Sales report will be released Monday.
  • Look for manufacturing news via the Empire State Index on Monday and the Philadelphia Fed Index on Thursday.
  • Housing data will be released Tuesday with the NAHB Housing Market Index and Wednesday with Housing Starts and Building Permits.
  • As usual, Weekly Initial Jobless Claims will be delivered on Thursday.

If you or someone you know has questions about home loan rates or products, please contact me. I’m always happy to help.

Related Articles

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

Volatility has disappeared in the financial markets and a sense of calm and complacency has emerged. Why? Well, thanks to the Fed, and to reduced threat of inflation and higher rates, both stocks and bond prices are moving higher. For 2019, home loan rates have been stable at one-year lows,…
Read More of the post Word of the Day: Complacency

“It's a small world after all.” If inflation moves lower — or is expected to move lower — rates must go lower as well. That's the situation right now. The financial markets and interest rates also follow inflation on a global scale. Why is this important to homeowners? If disinflation…
Read More of the post Disinflation Washes Up On Our Shores

This past week, the Bureau of Economic Analysis (BEA) reported the U.S. economy, as defined by Gross Domestic Product (GDP), grew at a 2.6% rate in the fourth quarter of 2018. Economists and the markets were expecting 2.0% to 2.3%, so this was a nice upside surprise. This left GDP…
Read More of the post U.S. Economy Showing Solid Growth