Mortgage rates increased again this week as investors continue to reprice inflation and interest rate risk.

January’s higher than expected PCE price index print and the latest speech from Minneapolis Federal Reserve president Neel Kashkari led investors to reprice inflation and Fed hike expectations significantly. As short-term borrowing costs increase, longer-term yields – specifically the yield on the benchmark 10-year Treasury note – briefly topped 4%, the highest level since November. The 30-year fixed mortgage rate followed.

However, the Conference Board consumer confidence index fell further in February and the ISM manufacturing PMI remained in contraction territory. These latest signals could cause investors to pause. As consumer finances buckle further under the weight of already high prices and higher borrowing costs, consumer spending is expected to fall, leaving an overheated labor market as the only potential threat to further consumer price disinflation.

In his latest speech, Kashkari indicated that he was leaning toward a sharp 50-basis point rate hike at the central bank’s next meeting, and that the February jobs and inflation data would inform his final decision.

With the Fed firmly focused on wage growth, February employment data could cause more policy uncertainty and higher mortgage rate volatility. Cooling wage growth in next week’s jobs report could send mortgage rates back down.