Powell is making headlines back to back weeks after his speech at Dallas sent mortgage rates higher.  With reports continuing to show a better than expected economy, many analysts are wondering when we'll start to see the much anticipated economic slowdown.

The average rate on a 30-year fixed rate conventional loan jumped higher - up from  6.83% (up from 6.70% last week and higher than the 6.76% we say before the election)! Sign up for our weekly Friday rate texts to see all the great options LendFriend provides to homebuyers! 

Inflation Continues To Trend As Expected

The consumer price index increased 0.2% in October and 2.6% annually, both of which were in line with analyst expectations. Core CPI - which excludes food and energy prices - also met analysts expectations, even if it was up 3.3% annually.

There's a lot to be happy about when it comes to the progress made on inflation EXCEPT... housing costs. The shelter index for housing costs, which carries about a one-third weighting in the broader index, climbed another 0.4% in October, DOUBLE the increase from September and up 4.9% on an annual basis!!

Keep in mind that shelter costs reflect how much tenants and homeowners living in their residence pay for housing services. Home prices have continued to hit record highs month after month in many parts of the country and interest rates have shot higher over the last 2 months. Lucky for today's buyers, higher rates and low buyer demand means buyers today have a opportunity to negotiate for a great deal (depending on their local market). We will need to see relief in one (or both) metrics to see the shelter index fall.  

The Economy Keeps Rolling

Retail sales rose 0.4% from September to October, higher than the 0.3% expected though less than the previous month’s robust 0.8% gain. The general fear is that higher sales = higher inflation.

So far, we are lucky we aren't seeing much inflation from stronger than expected retail sales. A 1.6% jump in sales at auto dealers drove much of the gain. Purchases climbed 2.3% at electronics and appliances stores and 0.7% at restaurants and bars. Though some of October’s rise in retail sales reflected higher prices, it mainly indicated increased purchases.

Powell Poo-poos More Rate Cuts
 
Last Thursday that the U.S. economy is “not sending any signals that we need to be in a hurry to lower rates.” WHAT. A. DISASTER!

He said while inflation is heading towards their 2% goal, it's still not there, and the labor market “is now by many metrics back to more normal levels that are consistent with our employment mandate." It's like he didn't even care about the October labor report! 

This speech was enough to make rates jump higher.   Analysts put odds on a third rate cut at 65.3% right now (down from last week).

Austan Goolsbee also known as the biggest cheerleader for rate cuts, on the other hand, says not only will we see a 25bp cut this December, but we'll also see AT LEAST a full point cut in 2025. I'm rooting for him to be right.