Latest inflation surprise could spur Fed hike and keep mortgage costs high
A 25-basis-point hike – which would follow a quarter-point increase when the Fed last met – could have significant consequences for mortgage holders and shoppers.
“For prospective homebuyers, the hotter-than-expected reading raises the likelihood of another Federal Reserve rate hike in October, potentially delaying much-needed mortgage-rate and affordability relief,” First American senior economist Sam Williamson said.
“Before the report, markets largely expected the central bank to wait until December for its next rate hike, following its first increase in three years last month. With both headline and core inflation exceeding forecasts, policymakers may instead move that hike forward to October.”
Even a rate increase this month mightn’t be the Fed’s last move of the year, Williamson added – though that will depend, he said, on incoming economic data.
No good news for mortgage rates as inflation rises again
Mortgage rates don’t move in lockstep with the Fed’s rate decisions, but expectations of central bank moves can push yields – and mortgage borrowing costs – higher.
