Happy Friday! Brian Manning here with the weekly update. Let's get right to it. Monday this week, bond markets were closed so not much to report there. Everything was closed for Columbus Day.

Tuesday this week, we had Loretta Mester in the news. Loretta Mester is the Cleveland Fed member. She's also a voting member with the Federal Reserve. She's one of the people that contributes into voting for whether they should hike or lower interest rates. You had Loretta Mester saying that she is very... excuse me, has not seen any progress with inflation being tamed and really thinks that we need to have a more restrictive monetary policy, which means hiking rates going in the next year.

What blows me away is if you look at Loretta Mester in the media last year, April, May, August of last year, all these media appearances saying that inflation is not a problem, "quote-unquote, she said she is unconcerned about inflation." And here you are with a complete 180-degree flip of being completely unconcerned about inflation last year to now, oh my gosh, inflation is a problem. We have to keep hiking rates. I don't know where she's been this whole time, but it blows me away that these are voting members of the Federal Reserve and this is their mindset.

Wednesday this week, we got PPI reports. So, PPI is the producer price index that measures wholesale inflation. PPI was up 4/10th of a percent. So, we definitely saw a little bit of rise there, but I'm not surprised. Thursday this week, there was a report we're waiting for. This is the CPI report. So... CPI is the Consumer price index. This measures inflation on a wholesale... I'm sorry, measures inflation for all of us as consumers. And CPI was up 4/10th of a percent. Expectations was that CPI would be up 2/10th of a percent. And CPI moved from being up on a year-over-year basis from 5.9% to six 6.6%. And we'll look at this in a moment.

I truly think we're past the worst in inflation. I know that it was kind of a bloody bath in the marketplace yesterday. I know that we saw mortgage rates move higher. Not everyone wants to see that or hear that, but I really do think that we're kind of nearing the end of the cycle right now. I'll look at the chart here and I'll show you more in a moment of why I say that. Also, part of the CPI is rents. And rents were up 8/10th of a percent. What's impactful about this is that the rental component makes up between like 24 and 25% of CPI.

So... as housing prices have gone up, as rents have gone up, it's definitely been a contributing factor into inflation. And here we were with rents up again 8/10th of a percent on a month-over-month basis. Today, we got the Cass Freight shipping index. So, this looks at the cost of shipping goods throughout the US. So, if you buy something in California and that goods getting shipped to Colorado, how many goods are moving around? And what's the cost of moving these goods?

Right now, on a year-over-year basis, this is up 16%. But it looks like based on their notes, they were finally starting to see some rebalancing in the marketplace for supply and demand. So, that's a good thing, because if we start to get rebalancing in the marketplace for supply and demand, that means that inflationary costs are going to go down. Let's take a look really quick at why I say that I think we're going to see inflation at its peak. Bear with me for just a minute here. I'm going to screen share. Ok, we've looked at this in the past. If you watched any of these updates, this will definitely look familiar for you.

So, we've been talking about this for months. We talked about this at the end of last year. We really thought that moving into this year, the summer months, July, August, September, were going to be brutal as far as inflationary readings are concerned. And inflation is the arch enemy of interest rates. So, we've known going into this that these were going to be the toughest months of all, and they were going to be the most negatively impactful for mortgage interest rates. So, what happens is these are the numbers that look at from 2021 through 2022. And when you get a new reading in the year of 2022, it replaces the reading in 2021.

So... What's really important here is that in 2021, July, August and September were very low inflationary readings. So, if you get a reading in the month of September, that's up, whatever, 4/10th of a percent, and you're replacing a number that was up 3/10th of a percent, then on paper, it looks like that inflation is continuing to rise. So, right around the 10th of the month, you get the inflationary report from the prior month, right.

So, we just got September's report. That's what we got yesterday, was the CPI for the month of September. We replaced this really low number and made inflation looks like it was going higher. But... What's important to really note here is you start looking at... August, November, December, all the way into June.

Now, we start seeing much higher inflationary numbers that we're going to replace. So, if we had an up 6/10th of a percent... Excuse me! Up 6/10th of a percent number in October 2021, and we replace it with up 2/10th of a percent, then inflation looks like it's going to start to come down. So, I truly think because of this right here, we may have seen inflation peak, which is great news for all of us in the housing industry and mortgage lending, because this means that you, theoretically, should see mortgage rates come down.

So, I'm going to predict that we're going to see inflation calm itself. We get the October reading we get on November 10th, and I don't think it's going to be enough to really make the Federal Reserve stop hiking interest rates. But I think we're going to start seeing some easing of inflation here and moving from October to June, with the exception of this month right here in March, I think we should see some easing there, which should be very impactful and helpful for us as far as mortgage interest rates are concerned.

I'm around all weekend. If you have any questions, let me know. If you want to get pre-approved, call me on my cell phone, shoot me a text. If you want to go through our strategic buyer consultation, reach out to me anytime. I would love to help you. Happy Friday! Hope you have a great day!

-Brian

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