While the stock market was volatile, it was a quiet week for mortgage markets. The major economic data revealed that inflation was a bit higher than expected, but its impact was minor, and rates again ended the week little changed near record low levels.
The reduced economic activity resulting from the partial shutdown of the economy due to the coronavirus has caused a significant decline in inflation. The Consumer Price Index (CPI) is a widely followed monthly inflation report that looks at the price change for goods and services.
In August, core CPI was 1.7% higher than a year ago, which was a little above expectations. While this was up from recent levels of just 1.2%, it still was far below the readings around 2.3% seen during the first few months of the year prior to the pandemic, and it had little effect on mortgage rates.
The European Central Bank (ECB) made no policy changes at its meeting on Thursday. Officials revised slightly higher their forecasts for economic growth and inflation over the next few years. ECB President Lagarde suggested that the trillions in monetary stimulus programs already offered since the outbreak of the pandemic would be fully utilized, but she did not comment on whether additional measures would be provided.
Investors will remain focused on medical advances to fight the coronavirus. Beyond that, the next Fed meeting will take place on Wednesday, and investors will be looking for more details about the Fed’s recently announced changes to its policy on inflation goals. Retail Sales also will be released on Wednesday. Since consumer spending accounts for over two-thirds of all economic activity in the US, the retail sales data is a key indicator of growth. Housing Starts will come out on Thursday.
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