Mortgage rates moved down this week as economic data continues to reflect a slowing US economy. Wednesday’s data on durable goods orders showed that, outside of the transportation sector, new orders were weak – a signal that goods inflation is continuing to inch down.
New orders tend to rise along with consumer confidence and an expanding economy. Investors will be eagerly awaiting the first quarter’s GDP data, unemployment claims and, most importantly, the March PCE price index, all of which are due to be released this week. Investors are hungry for more concrete evidence that inflation is waning. A decline in the PCE price index – and especially the core PCE, the Federal Reserve’s preferred inflation gauge – should send longer term yields, including mortgage rates, downward. Last month, the core PCE edged up slightly.
Without a meaningful decline in core PCE inflation towards the Fed’s inflation target, the yield on 10 year treasuries will remain high, and mortgage rates tend to follow those closely.