Happy Friday, Brian Manning here with the weekly update. Let’s see. Tuesday this week we had CPI. So CPI is the consumer price index, it’s our consumer gauge of inflation and on a year over year basis, the core rate was up 4.5%. So the core rate strips out volatile items such as food and energy costs, and puts inflation at a year over year rise a 4.5%. So prior to COVID, we were typically running like 1.4% to 1.7% on annual appreciation, so 4.5% is certainly a hot number.
Wednesday this week we got PPI. So PPI is the producer price index, so the PPI measures inflation at the wholesale level. So the wholesale level showed also the core rate was at an increase of 5% on a year over year basis. So from the consumer side to the wholesale side, as we said, really, in the beginning of this year that we’re going to start seeing inflation run hot and here we are. This week, we had fed president Jerome Powell talking and Jerome Powell certainly reaffirmed the markets that they were not going to make any monetary changes, that they feel like the inflation is running hot is only transitory, that’s going to go away, and that they’re not going to make any monetary policies right now which means that they don’t have a rate hike in the future and they’re not going to start tapering their bond buying so that’s just interesting to see what they’re going to do. We also had Janet Yellen talking and Janet Yellen saying, hey, we were a little bit caught off guard and inflation certainly exceeded what our expectations were as far as the numbers were concerned but we don’t really anticipate a problem because inflation is going to run hot for about another seven months and then after that, it will start to calm down.
So I’ll give you a little example of how the inflation works. So let’s just say you have $100 basket of goods. And if inflation is rising at a 2%, year over year basis, that $100 basket of goods at the end of the year is $102. Now let’s just say we have 10% appreciation, so $100 basket of goods at the end of the year is now $110. Now, if your inflation goes from 10% to 2%,so your basket of goods went from $100 to $110. And now you’re running 2% inflation now, that basket of goods starts to cost $112, and $114, and so on. And I know it’s not exact math, because you have compounding numbers, but it kind of gives you an idea. But if that $100 basket of goods went from $100 to $110, and then $110 to $112, the basket of goods does not come down in price because you need deflation for those costs to come down. So I’m not really sure, it seems like they’re a little bit disconnected as far as the just the mathematical numbers and the impact of inflation because certainly we’re seeing the numbers run hot here but seven months of hot inflation with doing nothing about is definitely going to have an impact on the markets and eventually could have an impact on mortgage rates, we’ll have to wait and see.
What I do want to show you as well as what’s going on with the 10 year treasuries. So mortgage rates generally move in the direction of the 10 year treasury, this is the yield on the 10 year treasury over the last six months, so when we look here, we see mortgage rates kind of started to generally increase from the end of January, beginning of February up until April, then I would say mortgage rates kind of went flat a little bit. And then from around May 24th or so through today, we’ve started to see interest rates come back down a little bit. So it’s really good to see a little bit of easing on the interest rates. This week alone we have locked in people at just some of the most amazing rates.
It’s really phenomenal to see how great rates are right now. So if you’re still considering buying a home, or refinancing, now is absolutely time to look at it, rates are phenomenal. I’m around all weekend. If you have any questions, call me on my cell phone, text me. Happy Friday. Have a great day!