In A Nutshell: Mortgage rates are coming down as investors dial back expectations for rate hikes. But that could change: Key inflation data comes out this week.
Last Week’s Highlights
Two highlights from a busy election week:
- The landslide win for Democrats could impact markets in two ways. One, markets are starting to price in some political risk to the AI boom because Democratic officials are expected to limit the buildout of data centers. Two, there’s now a higher likelihood of stalemates during budget negotiations and debt limit increases.
- Friday’s jobs report barely made a splash, even though it was significantly stronger than expected. The economy is now adding about 100,000 jobs per month, likely a bit above the breakeven rate given the low rate of immigration. The unemployment rate remains at historical lows and wages are still increasing 3.1% annually.
Upcoming Attractions
This week’s economics highlight is the CPI inflation data coming Tuesday, coupled with Friday’s PPI data. Together, the two will form a complete picture of the core PCE inflation measure the Fed uses. The consensus forecast has core CPI coming in at 0.2% month-over-month, down slightly from last month. Forecasters are expecting a small statistical distortion in the data due to last year’s government shutdown. A very low read for inflation might convince the Fed to hold off on hiking rates at the December meeting, but they could just as easily write it off as one data point. They would evaluate how broader financial conditions have changed since the last meeting, including any further improvement in rates.
Many Fed officials are holding speaking engagements this week. The ones to watch are Dallas Fed President Lorie Logan on Tuesday; Vice Chair Michelle Bowman on Monday, Tuesday, and Friday; Cleveland Fed President Beth Hammack on Thursday; and New York Fed President John Williams on Thursday.
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