Morning Report: Consumer Prices show progress on disinflation

Vital Statistics:

Stocks are higher after the CPI came in as expected. Bonds and MBS are flat.

Inflation rose 0.2% month-over-month and 3.2% year-over-year according to the Consumer Price Index. Excluding food and energy, the index rose 0.2% month-over-month and 4.7% YOY. The index for shelter accounted for 90% of the increase, which will moderate after home price appreciation peaked last year.

You can see the CPI sub-index for shelter working its way lower, and it is almost back to pre-pandemic levels. The Fed’s fear is that a pause will re-ignite home price appreciation, which will exacerbate the affordability problem and push inflation higher.

The September Fed Funds futures continue to increase the odds for a pause. The futures see a 10% chance of another rate hike in September. The odds of a rate hike by the end of the year are 25%.

Mortgage Capital Trading, Inc. (MCT®), the de facto leader in innovative mortgage capital markets technology, today announced the appointment of Steve Pawlowski as Managing Director, Head of Technology Solutions. Mr. Pawlowski will be responsible for expanding upon MCT’s proven record of driving efficiency and liquidity in the secondary market. He will report directly to MCT’s COO, Phil Rasori. “Steve’s technology leadership while at Fannie Mae
heralded a new era of capital markets transparency to the lender,” said Phil Rasori. “MCT is building on that effort in numerous ways, including initiatives to bring back-end pricing closer to the front-end pricing that mortgage borrowers receive. We’re proud Steve will be applying his vision and expertise to MCT Marketplace and other best in-class software solutions.”

Mortgage Applications fell 3.1% last week as purchases declined 3% and refis fell 4%. “Treasury yields rates rose last week and mortgage rates followed suit due to a combination of the Treasury’s funding announcement and the downgrading of the U.S. government debt rating. Rates increased for all loan types in our survey, with the 30-year fixed mortgage rate increasing to 7.09 percent, the highest level since November 2022,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Additionally, the rate for FHA mortgages increased to 7.02 percent, the highest rate since 2002. Not surprisingly, mortgage applications continued to decline given these higher rates, with overall application counts falling for the third consecutive week, as both purchase and refinance activity declined. The purchase index fell for the fourth consecutive week, as homebuyers continue to struggle with low for-sale inventory and elevated mortgage rates.”