Happy Friday. Brian Manning here with your Weekly Update. Once again, let’s get right to it. Lots of Fed talk this week. The Fed is kind of in a paradox which is for these reasons right here.

The Federal Reserve is raising rates and what’s going to happen is some point in time we’re going to go into a recession, 2020, 2021, not really sure. But the Federal Reserve raising rates right now gives them ammunition in the future so that when we do go into recession, they have tools available to them so that they can lower rates and stimulate the economy.

The paradox, though, is that if they raise rates too quickly, they could push us into a recession quicker than we would have gone into. Watching the Federal Reserve right now, really has the utmost importance with it. Keeping an eye on what they do, how quickly did they raise rates, what’s happening with the economy, really important and a lot of it revolves around the Federal Reserve, so tons of Fed talk this week.

Also, Wednesday of this week, as we do it every Wednesday, we get Mortgage Banker’s Association. They give us feedback on new mortgage applications. Always really curious to see this and what happens. Right now on a year-over-year basis, purchase mortgage applications are up 4.3%, which is incredible, because this is with the headwind of mortgage rates being three-quarters of a percent higher than where they were last year and also less inventory across the nation. So still we’re in a very strong purchase market.

Also this week, we get PPI. This is the Producer Price Index. This really measures a wholesale inflation, so what does wholesale inflation doing? Wholesale inflation dropped from 3.3% to 2.8%, so really nice to see a drop in inflation, and also really important this week, we got CPI. CPI is what’s called the Consumer Price Index. There’s two gauges of inflation in the US on a consumer level.

CPI is really the one that we look at and put the most weight on and really the markets do, as well, although the Federal Reserve doesn’t think this is the one to look at most strongly, but we really do. CPI, the reason why I think it’s the most important is because it also includes cost for out-of-pocket medical expenses and housing, which almost all of us incur these expenses for on a monthly basis. CPI, if you’re looking at what’s called the quarter rates, that’s consumer inflation, but strips out the cost of food and energy, because food and energy are volatile expenses. CPI on a year-over-year basis had a huge drop, which went from 2.4% down to 2.2%. So really good to see this.

One of the reasons why is because inflation is the enemy of bonds. The more inflation we see in the marketplace, the higher mortgage rates are going to go. It’s really nice to see a little bit of a drop in inflation here, because it’s been bond-friendly for us which has been mortgage rate-friendly for us, as well.

Have any questions, give me a call any time. Love to help you any way I can. Happy Friday. Have a great day.

Brian Manning is a licensed Loan Officer in Colorado for Guild Mortgage Company; Regulated by the CO Division of Real Estate. Licensed in the states of Colorado and Florida, NMLS #324952. The postings on this blog don't necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. This information is not guaranteed to be accurate and shall not be construed as a guarantee of loan approval. All loans are subject to underwriter approval, and are subject to change without notice.