Mortgage rates continue to climb, reflecting ongoing inflation and uncertain Federal Reserve policies. Despite mixed economic signals, the U.S. job market shows strength, adding 303,000 jobs in March. Consumer prices also rose, reducing the likelihood of a Fed rate cut soon.
Mortgage rates moved up six basis points from the prior week according to the Freddie Mac Primary Mortgage Market Survey released April 11th. Since their low point in mid-January, rates have been drifting higher for most of the year due to sustained inflation and the reevaluation of the Federal Reserve’s monetary policy path. While newly released inflation data from March continues to show a trend of very little movement, the financial market’s reaction paints a far different economic picture, as illustrated by a significant drop in the Dow Jones Industrial Average after yesterday’s CPI release.
Mortgage applications increased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 5, 2024. “Mortgage rates moved higher last week as several Federal Reserve officials reiterated a patient posture on rate cuts. Inflation remains stubbornly above the Fed’s target, and the broader economy continues to show resiliency. Unexpectedly strong employment data released last week further added to the upward pressure on rates,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
US consumer prices picked up again last month, vaulting to a 3.5% increase for the 12 months ended in March, according to the latest Consumer Price Index data released Wednesday by the Bureau of Labor Statistics. That’s up considerably from February’s 3.2% rate and marks the highest annual gain in the past six months. Wednesday’s report further highlights that the path to lower inflation remains extremely bumpy and that any loosening of monetary policy might not happen soon. “You can kiss a June interest rate cut goodbye,” Greg McBride, chief financial analyst for Bankrate, wrote in commentary issued Wednesday. Following the report’s release, the markets’ probability of a June rate cut sank to 21%, down from 53% on Tuesday and 73% last month, according to the CME FedWatch tool.
Job creation in March easily topped expectations in a sign of continued acceleration for what has been a bustling and resilient labor market. Nonfarm payrolls increased 303,000 for the month, well above the Dow Jones estimate for a rise of 200,000 and higher than the downwardly revised 270,000 gain in February, the Labor Department’s Bureau of Labor Statistics reported Friday. The unemployment rate edged lower to 3.8%, as expected, even though the labor force participation rate moved higher to 62.7%, a gain of 0.2 percentage point from February. “This is another really strong report,” said Lauren Goodwin, economist, and chief market strategist at New York Life Investments. Markets have been keeping close watch over the employment data particularly as the Federal Reserve weighs its next moves on monetary policy.
