The Fed’s key measure of inflation meets market expectations

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Published Date 2/29/2024

Today's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are getting some support today. The MBS market improved by +18 bps yesterday. This was not enough to decrease mortgage rates or fees. The market experienced low volatility yesterday.

Today's Rate Forecast: Neutral

Inflation: The Fed's key measure of Inflation, Core (ex food and energy) PCE increased by 0.4% which matched market expectations but was a pretty big jump in pace from December's 0.1%. YOY, it was up 2.8% versus estimates of 2.8%. The Headline PCE increased by 0.3% on a MOM basis and 2.4% on a YOY basis, both matched market expectations.

Incomes and Spending: We got a big beat in January Personal Incomes, up 1.0% versus estimates of only 0.4%, however most of that beat is due to dividends. Personal Spending hit 0.2% which matched expectations but was more than half December's pace of 0.7%.

Jobs: Initial Weekly Jobless Claims were 215K versus estimates of 210K. The more closely watched four week moving average dropped to 212K. Continuing Claims were ugly, breaking above 1.9M, (1.905M) versus estimates of 1.874M.

Manufacturing: The February Chicago PMI cratered down to 44 versus estimates of 48.

The Fed: Today we will hear from Goolsbee, Bostic and Mester.

Today's Potential Rate Volatility: High

This morning markets are getting a small boost on the PCE data. Volatility has started high but should moderate later in the day.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

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