Mortgage rates moved higher last week, reaching levels not seen since 2008.
The big driver was the CPI data release, which showed that inflation is not slowing as expected and likely requires more rate increases from the Federal Reserve. In addition, jobless claims showed a persistently tight labor market, which could drive up costs of goods and services as wages increase. Market predictions for the Fed’s September rate hike increased from 50 basis points to 75 basis points, while expectations for the terminal rate rose 50-75 basis points above prior estimates, driving up interest rates. Today the Fed announced a 75-basis point increase in the Fed Funds rate, meeting the expectations of investors.
Markets will now focus on jobless claims later this week and look for any further direction on Federal Reserve activity when Fed Chair Powell speaks on Friday.