{"id":85669,"date":"2026-05-18T11:09:40","date_gmt":"2026-05-18T18:09:40","guid":{"rendered":"https:\/\/www.redfin.com\/news\/?p=85669"},"modified":"2026-05-18T11:09:40","modified_gmt":"2026-05-18T18:09:40","slug":"weekly-economic-update-may-18-2026","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/news\/weekly-economic-update-may-18-2026\/","title":{"rendered":"Iran Tensions, Not Economic Data, Are Driving Mortgage Rates This Week"},"content":{"rendered":"

This Week In A Nutshell: <\/b>Rates are likely to move more on headlines out of Iran than on economic data. If peace talks show real progress, rates could come down, but if the Strait of Hormuz remains closed, markets will keep pricing in Fed rate hikes.<\/span><\/p>\n

Upcoming Attractions<\/b><\/h3>\n

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This is a light week for market-moving economic data. The main scheduled items are the FOMC minutes on Wednesday, the Philadelphia Fed manufacturing index and housing starts on Thursday, and final University of Michigan consumer sentiment on Friday. We\u2019ll also get pending home sales on Tuesday. The FOMC minutes may give more detail on how close the Fed is to dropping its easing bias and shifting to more neutral language. Fed speakers will also be out this week, including Waller, Barr, Paulson and Barkin. But all of that is likely to take a back seat to Iran. Markets are mostly watching whether there is progress toward reopening the Strait of Hormuz and bringing energy prices back down.<\/span><\/p>\n

Last Week\u2019s Highlights<\/b><\/h3>\n

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Last week\u2019s data had the same basic message as the prior few weeks: Growth is holding up better than expected, but inflation may still be too high. April CPI was close to expectations, with an <\/span>increase in headline inflation<\/span><\/a> driven by energy and core inflation boosted by a technicality in shelter. PPI prices were also hotter though the categories that the Fed cares about were less so. Activity data were solid. Retail sales rose 0.5% in April, industrial production rose 0.7%, manufacturing production rose 0.6%, and the first May regional manufacturing survey was strong. That led to higher expectations for Q2 GDP.<\/span><\/p>\n

Fed officials also sounded more worried about inflation. Goolsbee, Collins and Schmid all emphasized inflation risks, while Williams said he did not see a reason to either raise or lower rates right now. Ten-year Treasury yields rose sharply as investors increasingly priced the risk that the Fed\u2019s next move could eventually be a hike rather than a cut.<\/span><\/p>\n

Diving a Little Deeper<\/b><\/h3>\n

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The tricky part of the current environment is that the economy looks resilient right now, but possibly for temporary reasons. Tax cuts appear to be cushioning consumers from higher gas prices in the short term, and some business activity may have been pulled forward ahead of expected price increases and supply chain issues. That helps explain why growth is holding up in the face of higher energy prices. But if oil prices stay high, the pressure should eventually show up more clearly in growth. Higher gas prices reduce real income, push inflation expectations higher, and make consumers more cautious.<\/span><\/p>\n

For housing, the story is mixed. On one hand, the labor market looks better, pending sales have improved, and the spring market may finally be showing some life. On the other hand, mortgage rates remain volatile and spiked again on Friday because inflation fears are dominating growth fears. That calls into question how long the current boost in housing may last. It all depends on when the US and Iran can come to an agreement on opening the Strait of Hormuz.<\/span><\/p>\n

Redfin Housing Market Reports<\/b><\/h3>\n

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America\u2019s Housing Market Favors Buyers\u2014But Their Advantage Is Finally Starting to Shrink<\/b><\/a><\/p>\n