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Persistent Inflation Remains

Market Update | Jason Obradovich

 

Jason: Hello, everyone, and welcome back to the Mortgage Rundown. Today, we're talking about, well, you guessed it, inflation.

Before we get to inflation, let's talk about interest rates. If you look at the chart on your screen, you're going to see the 10-year Treasury starting to creep up to that 1.7 to 1.75% ceiling. Now, for breaks through there, it really easily could jump all the way up to 2% or even higher. And the reason being, you guessed it, inflation.

The first chart on your screen is PCE. That is the Fed's preferred inflation measurement, and it's up over 3.5%. So, is inflation transitory or not? I'll let you be the judge, but as you can see, it's not going down.

The next chart on your screen is CPI, the Consumer Price Index, and as you can see, it's up over 5 to 5.5%. That's not going down either, right? We're seeing consistent inflation.

The last chart on your screen is PPI: Producer Price Index. It's a little bit of a different inflation measurement than most people look at, but it's the price of goods before they actually go out to the sellers. Now that's climbing and climbing above 5% and it doesn't look like it's going to stop climbing, at least as of right now.

So, if you combine all these things together, we have interest rates moving slightly higher. We have persistent inflation and PPI now climbing up to a level that we don't know where it's going to stop. That's just going to put more and more pressure on rates.

Two weeks from today, we're going to have the FOMC meeting where they’re going to have to make some decisions about inflation and what they're going to do in terms of both their interest rates, but also in terms of their stimulus, whether it's, you know, Treasury buying or MBS purchases.

That’s it everyone from the Capital Markets’ Desk this week. Thank you all for watching and have a great day.

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