Housing News

Running Out of Runway: Markets Brace for Inflation Report

Welcome back to the Mortgage Rundown. We are going to talk about what’s happening with interest rates.

Here we are, most of the way through August and the U.S. Federal Reserve still hasn’t moved interest rates once in 2025. This month has definitely been very eventful already with the potential for huge market movement next week.

The narrative for 2025 has been a very resilient economy with low unemployment, decent job growth, and inflation mostly contained.

That narrative changed very quickly earlier this month when the employment report came out for July showing only 73,000 jobs were added. There was also a major downward revision to both May and June employment numbers, down by a combined 258,000 jobs.

This was one of the most shocking job reports we’ve seen in years. Suddenly, there is grave concern about the direction the economy is heading.  While we’ve seen some interest rate relief since that report was published, the only thing keeping rates from dropping further are inflation concerns.

Last week, we got a taste of inflation data when Consumer Price Index (CPI), which measures inflation, came neither higher nor lower. A Producer Price Index (PPI) report, another inflation gauge, the next day was slightly elevated above expectations.

When you combine that all with the tariff negotiations and trade disputes, the market is rightly concerned that we could see another small spike in inflation at a very critical juncture.

I can’t stress enough how important next week’s Personal Consumption Expenditures Price Index (PCE) report will be. (The report looks at price changes in goods and services.) If we see any upward movement in inflation, that could push interest rates right back up to highs we saw earlier this year.

If there isn’t any rise in inflation, that could calm the markets. The focus then becomes on the jobs market and when and how quickly the Fed will move interest rates down.

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