Rates Flat Despite Inflation Data

Mortgage interest rates were mostly flat on the week despite stronger than expected inflation data.  The January Consumer Price Index (CPI) was up 0.5% on expectations that it would be up 0.3%.  Core CPI, excluding the food and energy components, was up 0.3% on expectations that it would be up 0.2%.  Year over year CPI was up 2.1% and core CPI was up 1.8%.  Other economic data was mostly stronger than expected.  Economic data stronger than expected included the January Treasury Budget, the January NFIB Small Business Optimism Index, the January core Producer Price Index (PPI), the Philadelphia Fed Business Index, January Housing Starts and Building Permits, January Import and Export Prices, and the University of Michigan Consumer Sentiment Index.  Economic data weaker than expected included January Retail Sales, the February New York Empire State Manufacturing Index, January Industrial Production, and January Capacity Utilization.  It’s likely that the Fed will increase the Fed Funds rate three times this year with the possibility of a fourth rate increase.

 

The Dow Jones Industrial Average is currently at 25,336, up over 1,100 points on the week.  The crude oil spot price is currently at $61.44 per barrel, up over $2 per barrel on the week.  The Dollar weakened versus the Euro and Yen on the week.

 

Next week look toward Wednesday’s PMI Composite Flash, Existing Home Sales, and FOMC Minutes and Thursday’s Jobless Claims and Leading Economic Indicators as potential market moving events.  The Treasury auctions 2-Year Notes, 5-Year Notes, and 7-Year Notes as well.  U.S. markets are closed on Monday for Presidents Day.