Overall, it was another positive week for homebuyers - inflation stats came in better than expected as the tariff price hikes still just a fear, not a reality - at least not yet. Consumer sentiment is back on the rise, which makes sense given the muted effects of tariffs, stock market gains and interest rate drops we've seen over the last few weeks.
The average rate on a 30-year fixed rate conventional loan fell to 6.781% - from 6.813% the week before.
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Inflation Eases Again, But Tariff Risks Loom CPI - one of the most anticipated reports every month - gave us a huge sigh of relief after reporting showed an increase of just 0.1% for the month (vs. 0.2% expected), putting the annual inflation rate at 2.4%! Even better - core CPI (which excludes food and energy prices) came in respectively at 0.1% and 2.8%, compared with forecasts for 0.3% and 2.9%.
Interestingly, the key items that many expected to increase due to tariffs, like vehicle and apparel prices, actually posted declines. in pricing. PLUS, shelter price inflation is FINALLY cooling off, increasing 3.9% year-over-year - which sounds like a lot, but it's actually the lowest reading since 2021.
PPI - a less critical, but still important metric - showed that inflation on the prices that producers pay for goods remained muted in May across the board, another sign that tariffs have yet to result in higher prices for consumers and businesses.
Seema Shah, chief global strategist at Principal Asset Management said “Tariff-driven price increases may not feed through to the CPI data for a few more months yet, so it is far too premature to assume that the price shock will not materialize.”
Shah is right - the hope is that much of the trade deals Trump wants will be negotiated quickly before pricing is forced to passed to consumers.
US Government ❤️ SpendingAfter a short-lived surplus in April thanks to tax season, the deficit totaled over $316 billion for the month, taking the year-to-date total to $1.365 trillion. Paying the interest on our $36.2 trillion debt cost us over $92 billion!
The annual tally was 14% higher than a year ago. The new spending bill is still going through the Senate, and we'll see what changes are made through that process - hopefully to lower the deficit in coming years.
Jobless Claim WoesContinuing jobless claims are at the highest level since 2021 after last week's report was released, and initial filings are at an 8-month high. It's not a good sign for the labor market, but for some reason these figures haven't found their way into the jobs data. We'll see if it has an impact on the June labor data (released July 3rd).
"There are early warning signs in the labor market," said Navy Federal Credit Union's chief economist, Heather Long. "If layoffs worsen this summer, it will heighten fears of a recession and consumer spending pullback.”
Rate Cut Predictions September 17th is still the firm target date (unfortunately) even after the most recent inflation data.
Remember the Fed has a dual mandate - maximize employment and lower inflation. They are cautious to not lower rates because of the inflation risks with tariffs/government spending, but the labor risks may force their hand if the job market deteriorates
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Instagram for immediate reactions to all news. The recent events in the Middle East may have a volatile effect on the mortgage rates this week, but so far there hasn't been much movement.