Rates Flat on Soft Inflation Data

Mortgage interest rates were mostly flat on the week as inflation data was weaker than expected. The July Consumer Price Index (CPI) was up only 0.1% on expectations that it would be up 0.2%. Year over year, CPI is up just 1.7%, below the Fed’s 2% target. The July Producer Price Index (PPI) was down 0.1% on expectations that it would be up 0.1%. Year over year, PPI is up 1.9%. The softer inflation data may call into question the Fed’s tapering of its balance sheet starting in September. Other economic data was mixed. Economic data stronger than expected included the June JOLTS Job Openings, the first look at Q2 Productivity, and June Wholesale Inventories. Economic data weaker than expected included June Consumer Credit, the first look at Q2 Unit Labor Costs, and weekly jobless claims. The Treasury auctioned $62 billion of 3 Year Notes, 10 Year Notes, and 30 Year Bonds which were met with mixed demand. Geopolitical tensions have increased with North Korea which has supported the bond market.

The Dow Jones Industrial Average is currently at 21,872, down over 200 points on the week. The crude oil spot price is currently at $48.21 per barrel, down over $1 per barrel on the week. The Dollar weakened versus the Yen and Euro on the week.

Next week look toward Tuesday’s Retail Sales, Empire State Manufacturing Survey, Import and Export Prices, Business Inventories, and Housing Market Index, Wednesday’s Housing Starts and FOMC Minutes, Thursday’s Jobless Claims, Philadelphia Fed Business Outlook Survey, and Industrial Production, and Friday’s Consumer Sentiment Index as potential market moving events.