Mortgage rates were up slightly this week, holding firm near 20-year highs after an eventful seven days filled with key monetary policy, economic and political updates.
After rising strongly in response to comments from the Federal Reserve indicating that more rate hikes and policy tightening were likely in the coming months, mortgage rates had a muted reaction to the October jobs figures, which showcased a resilient, but softening labor market. Rates had a similarly mild response to the midterm election results, although some of the races remain too close to call and still possess the ability to affect market sentiment, depending on the results. The main reason for markets’ quiet reaction to these otherwise blockbuster events is the disproportionate importance of inflation data – the latest of which are due to be reported on Thursday.
Inflation can strongly influence interest rates in “normal” times, but the influence of rising consumer prices is particularly acute in today’s climate, as the Fed takes aggressive measures to dampen inflation. Thursday’s CPI release will almost certainly push mortgage rates strongly in either direction once it arrives.