Rates Heading Down

Mortgage rates have stabilized and are slowly heading lower due to the continued good news on inflation.

PCE: Measure of Inflation

The Fed’s favorite measure of inflation, Personal Consumption Expenditures (PCE), showed that inflation rose 0.1% in November and 5.5% year over year. The core rate, which strips out food and energy prices and is what the Fed is more focused on, rose 0.2% and 4.7% year over year, which is lower than the 5% seen in the previous report.

Inflation Dropping from 7% High

Inflation trending lower is good for the markets, as the Fed wants core PCE to reach 2%. We are starting to see a nice improvement from the peak of 5.4% in February 2022 and the anticipation is for this to gradually continue to move lower as more reporting comes out this year. The headline number peaked at 7% in June 2022 and has now moved to 5.5%, a 1.5% decline. We could see more meaningful drops in January/February 2023, but the real move lower will likely happen in May 2023, with June of 2023 being my target for mortgage rates to fall below 5% APR again.

PPI: Measure of Wholesale Inflation

The Producer Price Index(PPI), which measures wholesale inflation, was reported for the month of December 2023. The Headline PPI figure was down 0.5%, which was below expectations of