Consumer inflation remained near a 40-year high and home purchase activity stayed strong in May. Home prices also continued to rise in April. And with first quarter GDP reported at -1.6%, May’s lower than expected Personal Spending report was especially significant. Here’s what you need to know:
- Consumer Inflation Remains Near 40-Year High
What’s the bottom line? Remember that the main tool the Fed uses to curb inflation is hiking its benchmark Fed Funds Rate, which is the interest rate for overnight borrowing for banks and it is not the same as mortgage rates. Counterintuitively, when the Fed hikes its benchmark Fed Funds Rate, this can be good for mortgage rates because it curbs inflation.
At its June meeting, the Fed hiked the Fed Funds Rate by 75 basis points due to high inflation, which was the largest increase since 1994. The Fed has stated that depending on the data, they will hike another 50 or 75 basis points at their meeting on July 26-27 and investors will be closely watching what actions the Fed takes later this month.
- Keeping an Eye on Jobless Claims
The number of people filing for unemployment benefits fell by 2,000 in the latest week, as 231,000 Initial Jobless Claims were reported. Continuing Claims, which measure people who continue to receive benefits after their initial claim is filed, decreased by 3,000 to 1.328 million, which is just above a 50-year low.
What’s the bottom line? While Initial Jobless Claims decreased in the latest week, the 4-week average is at the highest level since December and it has been consistently moving higher. So even though Initial Jobless Claims remain low, there is a clear trajectory higher, which should continue given the announcements of significant layoffs from several public companies. Once some of these layoffs are reflected in these numbers, we should see this figure really start to jump, which will lead to a higher unemployment rate.
Since leaving the US Army in 1990, Blair has been serving and helping people. With an extensive customer service background along with integrity, strong work ethic and a personal desire to see others succeed in their dreams, Blair helps you to succeed in buying a home.
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