Large Mortgage Rate Swings This Week But More Pressure on the Downside

Mortgage rates increased this week as the latest jobs report pointed to a tighter than expected labor market and perhaps more resilient inflation pressures. But Wednesday's news that inflation eased sharply in March is causing mortgage rates to tick down.

Despite the falling employment growth headline, last week’s jobs report signaled that the labor market remained very tight with high wage growth in services – a signal that inflation could remain elevated.  Core inflation, especially rent inflation, tends to respond more to a tight labor market than other components of the Consumer Price Index (CPI).  Combined, these signals pushed the yield on longer term rates, including mortgage rates, higher. However, mortgage rates began to reverse course on today’s news that headline inflation fell substantially in March.

Of course, much uncertainty remains, and mortgage rate volatility could remain elevated as core inflation remains well above the Federal Reserve’s inflation target.