The Federal Reserve’s decision to maintain the current interest rates has paved the way for a potential rate cut in September. While this news has been met enthusiastically by lending partners, the broader markets have indicated a slightly less warm reception despite both the data and Federal Reserve’s intentions being a match. Until September, we can expect a lull in significant data releases, with more substantial decisions anticipated then.

FOMC Rate Decision

Powell stated that the Federal Reserve seeks “a little more confidence” that inflation is consistently trending downward before taking action. The Federal Reserve’s benchmark short-term interest rate now stands at 5.25% to 5.5%. Although consumer prices spiked briefly in the first few months of the year, causing the Federal Reserve to hesitate, inflation has since calmed.

Consumer Confidence 

The index of consumer confidence rose to 100.3 in July from a revised 97.8 in the prior month, the Conference Board said Tuesday. Economists polled by the Wall Street Journal had forecast the index would slip to 99.5 in July.

U.S. Hourly Wages

Wages rose a mild 0.2% last month. The increase in pay over the past year slowed to 3.6% from 3.8% in the prior month and is returning close to pre-pandemic levels.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.08% with the current rate at 5.99%
• 30-Yr FRM rates are seeing a decrease by -0.05% with the current rate at 6.73%

MND Rate Index

• 30-Yr FHA rates saw a -0.22% decrease for this week. Current rates at 6.10%
• 30-Yr VA rates saw a -0.22% decrease for this week. Current rates at 6.12%

Jobless Claims

Initial Claims were reported to be 249,000 compared to the expected claims of 235,000. The prior week landed at 235,000.

What’s Ahead

Last week was tense as everyone anticipated the Federal Reserve’s decision to maintain interest rates. This week, apart from the usual unemployment data, there are only minor releases like the US Services PMI and Consumer Credit Reports, which aren’t expected to have a significant impact.

Following the release of the PCE Index figures, which the Federal Reserve prefers as its key inflation metric, the data indicates a slight increase in inflation for the third quarter. Nonetheless, market sentiment remains unchanged, and the prediction that the Federal Reserve is on track to implement rate cuts this year holds firm. Saddled along with the PCE Index, we also have the Personal Income & Spending reports which have indicated the economy is still expanding, and the GDP estimates have also corroborated the reports with their own solid pre-release numbers. 

PCE Index

Prices in the U.S. rose slightly in June in another confirmation that inflation has slowed again, keeping the Federal Reserve on track to cut high U.S. interest rates in the next few months. The Fed’s preferred PCE index edged up 0.1% last month, the government said Friday. That matched the forecast of economists polled by The Wall Street Journal.

Consumer Spending

Consumer spending rose a mild 0.3% in June to help keep the U.S. economy expanding at an above-average speed. Households spent more on travel, recreational goods, medicine, and utilities amid a summer heat wave, government data showed.

GDP (Pre-release)

So much for the U.S. economy shedding most of its surprising strength from last year. Gross domestic product, the official scorecard of the economy, expanded at an above-average 2.8% annual pace in the second quarter, the government said Thursday. Economists polled by The Wall Street Journal had forecast a 2.1% increase. GDP grew twice as fast as it did in the first quarter when the economy expanded at a 1.4% rate.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.02% with the current rate at 6.07%
• 30-Yr FRM rates are seeing an increase by 0.01% with the current rate at 6.78%

MND Rate Index

• 30-Yr FHA rates saw no change for this week. Current rates at 6.32%
• 30-Yr VA rates saw no change for this week. Current rates at 6.34%

Jobless Claims

Initial Claims were reported to be 235,000 compared to the expected claims of 235,000. The prior week landed at 245,000.

What’s Ahead

All eyes are on the FOMC rate decision this upcoming week. The only notable release for this week outside of the rate decision meeting is the Non-farm Payroll numbers, which are a greater figure for the state of consumer spending power, and whether income is keeping pace with inflation.

The week after the inflation data reports was expected to be relatively quiet, with the most significant event being a meeting with Federal Reserve Chairman Jerome Powell. He remained tight-lipped about when rate cuts would happen, but given his demeanor, he did not deny that rate cuts were on the way — simply that he would not indicate when they would arrive. This has only confirmed to lending partners and the broader market that they were right to feel optimistic that rate cuts are possible before the end of the year.

There were a few cyclical reports released, with the Economic Indicators report taking the lead and the Federal Reserve’s Beige Book being among the highlights.

Economic Indicators

The leading index for the economy fell again in June for the fourth month in a row, reflecting a slowdown in U.S. growth since the beginning of the year. The privately run Conference Board said the index slid 0.2% last month. The index had fallen for two straight years before briefly turning positive in February.

Federal Reserve’s Beige Book

U.S. economic activity seemed to soften in the past two months, with five of the Federal Reserve’s 12 regions reporting flat or declining activity, a Fed survey released Wednesday found. That is three more weak districts than were reported in the last survey, in May.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.12% with the current rate at 6.05%
• 30-Yr FRM rates are seeing a decrease by -0.12% with the current rate at 6.77%

MND Rate Index

• 30-Yr FHA rates are seeing an increase by 0.07% for this week. Current rates at 6.32%
• 30-Yr VA rates are seeing an increase by 0.08% for this week. Current rates at 6.34%

Jobless Claims

Initial Claims were reported to be 243,000 compared to the expected claims of 229,000. The prior week landed at 223,000.

What’s Ahead

Next week, the government will release the Consumer Confidence Report and the total U.S. employment data. Both of these reports should provide insights into the state of the economy and consumer sentiment.

With lofty expectations, the CPI delivered a lower-than-expected inflation increase, leading to a positive uptake across many lending partners and markets. However, the PPI was on the opposite end of that, with a higher-than-expected inflation rate increase, muting the positive response from the CPI data release.

The outlook for a rate cut this year has changed, making the potential for it highly likely. Even Jerome Powell, who usually has a more hawkish response regarding rate cuts, is now leaving some room for this possibility. With the outlooks in favor of a rate cut, we’re seeing the impact across many markets as the potential change for rates is reduced long term.

Consumer Price Index

The cost of consumer goods and services fell in June for the first time since the pandemic in 2020, affirming a recent slowdown in inflation that could impel the Federal Reserve to cut high U.S. interest rates in the next few months. The consumer price index fell 0.1% last month after no change in May, the government said Thursday. That’s the first drop since May 2020 at the height of the pandemic when the economy was mostly shut down.

Producer Price Index

Wholesale costs rose slightly faster than expected in June, but not enough to counter a recent string of reports showing inflation has slowed again. The Producer Price Index advanced 0.2% last month, the government said Friday. That was a touch faster than Wall Street’s 0.1% forecast.

Consumer Credit

Total consumer credit rose $11.3 billion in May, up from a $6.5 billion gain in the prior month, the Federal Reserve said Monday. Economists had been expecting a $8 billion gain, according to a Wall Street Journal survey. The rise in May translates into a 2.7% annual rate, stronger than the 1.5% rise in the prior month.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.08% with the current rate at 6.17%
• 30-Yr FRM rates are seeing a decrease by -0.06% with the current rate at 6.89%

MND Rate Index

• 30-Yr FHA rates are seeing a decrease by -0.25% for this week. Current rates at 6.25%
• 30-Yr VA rates are seeing a decrease by -0.26% for this week. Current rates at 6.26%

Jobless Claims

Initial Claims were reported to be 222,000 compared to the expected claims of 236,000. The prior week landed at 239,000.

What’s Ahead

Proceeding reports after the inflation data releases are, as expected, having a very light release schedule. The only notable release are the retail sales reports which indicate how much consumers have leveraged their purchasing power in the last quarter.

With lofty expectations, the CPI delivered a lower-than-expected inflation increase, leading to a positive uptake across many lending partners and markets. However, the PPI was on the opposite end of that, with a higher-than-expected inflation rate increase, muting the positive response from the CPI data release.

The outlook for a rate cut this year has changed, making the potential for it highly likely. Even Jerome Powell, who usually has a more hawkish response regarding rate cuts, is now leaving some room for this possibility. With the outlooks in favor of a rate cut, we’re seeing the impact across many markets as the potential change for rates is reduced long term.

Consumer Price Index

The cost of consumer goods and services fell in June for the first time since the pandemic in 2020, affirming a recent slowdown in inflation that could impel the Federal Reserve to cut high U.S. interest rates in the next few months. The consumer price index fell 0.1% last month after no change in May, the government said Thursday. That’s the first drop since May 2020 at the height of the pandemic when the economy was mostly shut down.

Producer Price Index

Wholesale costs rose slightly faster than expected in June, but not enough to counter a recent string of reports showing inflation has slowed again. The Producer Price Index advanced 0.2% last month, the government said Friday. That was a touch faster than Wall Street’s 0.1% forecast.

Consumer Credit

Total consumer credit rose $11.3 billion in May, up from a $6.5 billion gain in the prior month, the Federal Reserve said Monday. Economists had been expecting a $8 billion gain, according to a Wall Street Journal survey. The rise in May translates into a 2.7% annual rate, stronger than the 1.5% rise in the prior month.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.08% with the current rate at 6.17%
• 30-Yr FRM rates are seeing a decrease by -0.06% with the current rate at 6.89%

MND Rate Index

• 30-Yr FHA rates are seeing a decrease by -0.25% for this week. Current rates at 6.25%
• 30-Yr VA rates are seeing a decrease by -0.26% for this week. Current rates at 6.26%

Jobless Claims

Initial Claims were reported to be 222,000 compared to the expected claims of 236,000. The prior week landed at 239,000.

What’s Ahead

Proceeding reports after the inflation data releases are, as expected, having a very light release schedule. The only notable release are the retail sales reports which indicate how much consumers have leveraged their purchasing power in the last quarter.

With the FOMC Minutes coming precisely within expectations, there is once again a lot of optimism that the Federal Reserve may cut rates this year. Much of the Q2 data reports show favorable amounts of reduction in inflation as well as a more stable economic outlook for the rest of the year. With the larger reports in PMI Manufacturing numbers and Non-farm Payroll figures, the overall outlook seems to align with the rest of the data points, justifying the more recent optimism about potential rate cuts. This week should give the final results on Q2 inflation results with the new releases of CPI and PPI data reports.

Global US Manufacturing PMI

A key barometer of U.S. factories fell in June for the third month in a row, signaling that an ongoing slump in the industrial side of the economy shows no sign of ending. The Institute for Supply Management’s manufacturing index slipped to 48.5% in June from 48.7% in the prior month. Numbers below 50% signal that the manufacturing sector is shrinking.

U.S. Hourly Wages

Wage growth for the last 12 months ending in June slowed to 3.9% from 4.1%, marking the smallest increase seen since August 2021. At one point, yearly wages were rising as fast as 5.9%. A shortage of labor prompted millions to change jobs in pursuit of better pay, particularly to cope with significant inflation.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.09% with the current rate at 6.25%
• 30-Yr FRM rates are seeing an increase by 0.09% with the current rate at 6.95%

MND Rate Index

• 30-Yr FHA rates are seeing a decrease by -0.01% for this week. Current rates at 6.50%
• 30-Yr VA rates are seeing no change for this week. Current rates at 6.52%

Jobless Claims

Initial Claims were reported to be 238,000 compared to the expected claims of 233,000. The prior week landed at 234,000.

What’s Ahead

CPI and PPI are the most relevant reports coming up, with the rest of the week having an extremely light release schedule. 

Following the release of key data such as the FOMC rate decision and CPI and PPI inflation reports, only the PCE Index reports remained to set the course, which are coming in well within expectations. The Consumer Confidence Report is also a significant concern since it influences broader economic decisions when consumers hesitate to spend, usually due to rising living costs.

Consumer Confidence Report

Consumers were slightly more optimistic about the economy at the end of June, but the effects of high inflation in the past few years still weighed on their minds. The final reading of the consumer sentiment index rose to 68.2 in June from a preliminary 65.6 earlier in the month, but it’s still the lowest level in seven months. The index also stands well below a prepandemic peak of 101. Although Americans think inflation will ease, they say high inflation and slower income growth have worried them more about their finances, according to the University of Michigan survey.

PCE Index

The Federal Reserve’s preferred PCE index was unchanged last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a flat reading. If inflation continues to recede in the next few months, the Fed could lay the groundwork to cut U.S. interest rates in the fall. The increase in inflation in the past 12 months slipped to 2.6% from 2.7%. The Fed is aiming to bring inflation down to 2% a year.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.03% with the current rate at 6.16%
• 30-Yr FRM rates are seeing a decrease by -0.01% with the current rate at 6.86%

MND Rate Index

• 30-Yr FHA rates are seeing an increase by 0.02% for this week. Current rates at 6.51%
• 30-Yr VA rates are seeing an increase by 0.02% for this week. Current rates at 6.52%

Jobless Claims

Initial Claims were reported to be 233,000 compared to the expected claims of 235,000. The prior week was landed at 239,000.

What’s Ahead

Next week, we anticipate ISM Manufacturing data, U.S. trade deficits, and overall U.S. unemployment figures to provide further insights into the direction of the economy. Despite being less comprehensive reports, they often serve as early indicators of inflation trends which are a crucial focus for all stakeholders.

Currently, the Retail Sales Report is the sole report that has weight. With the passage of more optimistic inflation data reports, retail sales coming in slightly under expectations will have little to no bearing on the overall outlook. Given the last major reports indicating the economy’s health and state of inflation, there is more optimism toward a potential rate cut this year. Lending partners have still been quick to continue cutting rates.

Consumer Price Index

Sales at U.S. retailers barely rose in May, suggesting Americans are feeling the weight of lingering inflation and high interest rates. Sales edged up 0.1% last month. They had been forecast to rise 0.2%, based on a Wall Street Journal poll of economists.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.04% with the current rate at 6.13%
• 30-Yr FRM rates are seeing a decrease by -0.08% with the current rate at 6.87%

MND Rate Index

• 30-Yr FHA rates are seeing an increase by 0.05% for this week. Current rates at 6.49%
• 30-Yr VA rates are seeing an increase by 0.05% for this week. Current rates at 6.50%

Jobless Claims

Initial Claims were reported to be 238,000 compared to the expected claims of 235,000. The prior week landed at 243,000.

What’s Ahead

One of the Federal Reserve’s preferred inflation data points will be released next week in the PCE Prices Report, followed closely by the Chicago PMI and the Univ. Michigan Consumer Sentiment reports. 

A welcome and unexpected data release for both the PPI and CPI shows inflation expectations coming in lower than expected. The positive news was somewhat mitigated by the hawkish FOMC rate decision that also took place during the same week. Still, there is more optimism given that the data releases in the past 30 days have shown signs of inflation coming under control. At the very least, it suggests that the Federal Reserve’s policy to keep inflation under control has been effective. As a result, lending partners have quickly cut rates again after the meeting this week.

Consumer Price Index

The cost of consumer goods and services were unchanged in May for the first time in almost two years, suggesting the resurgence in inflation earlier in the year might be petering out. The flat reading in the Consumer Price Index last month was below the forecast for a 0.1% increase, based on a poll of economists by The Wall Street Journal.

Produce Price Index

U.S. wholesale prices fell in May for the second time in three months (thanks partly to lower gas prices), perhaps another sign that the upturn in inflation earlier this year is fading. The Producer Price Index dropped 0.2% last month, the government said Thursday. Economists polled by The Wall Street Journal had forecast an increase of 0.1%.

FOMC Rate Decision

Federal Reserve Chair Jerome Powell was tight-lipped at his press conference Wednesday, having been stung previously by too much optimism. The Federal Reserve remained hawkish throughout the conference and maintained current interest rates.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.12% with the current rate at 6.17%
• 30-Yr FRM rates are seeing a decrease by -0.04% with the current rate at 6.95%

MND Rate Index

• 30-Yr FHA rates are seeing a decrease by -0.20% for this week. Current rates at 6.44%
• 30-Yr VA rates are seeing a decrease by -0.20% for this week. Current rates at 6.45%

Jobless Claims

Initial Claims were reported to be 242,000 compared to the expected claims of 225,000. The prior week landed at 229,000.

What’s Ahead

The proceeding weeks for FOMC rate decisions and inflation data reports are typically light. Next week has a higher-than-expected amount of influential releases. The lineup includes Retail Sales and the official S&P Global US Manufacturing PMI numbers, giving us a clear indicator of the state of manufacturing for the U.S.

With the CPI and PPI reports coming up this week, the previous week was light on reports of any significance. Most notable was the Non-Farm Payrolls which can have an outsized impact on inflation data reporting, as it’s a useful barometer to compare the cost of goods to the payroll of the average consumer. Following that is the ISM Manufacturing Index which came in slightly under expectations. Lastly, the JOLTS Job Openings is a minor indicator, but useful for seeing the state of the job market.

Non-Farm Payrolls

Wages are growing by about 4%. The Federal Reserve wants to see annual worker pay increase slow to 3% or less to help the central bank return U.S. inflation to low pre-pandemic norms. However, it’s not seeing much progress lately.

JOLTS Job Openings

The number of job openings in the U.S. sank in April to a more than three-year low of 8.1 million, another sign the labor market is cooling off as the economy slows.

ISM Manufacturing Index

A key barometer of U.S. factories fell to a three-month low as new orders waned and businesses were reluctant to invest due to high interest rates. “The manufacturing side of the economy appears to have stalled,” said Timothy Fiore, chairman of the Institute for Supply Management’s manufacturing index.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing a decrease by -0.07% with the current rate at 6.29%
• 30-Yr FRM rates are seeing a decrease by -0.04% with the current rate at 6.99%

MND Rate Index

• 30-Yr FHA rates are seeing a decrease by -0.11% for this week. Current rates at 6.64%
• 30-Yr VA rates are seeing a decrease by -0.12% for this week. Current rates at 6.65%

Jobless Claims

Initial Claims were reported to be 229,000 compared to the expected claims of 220,000. The prior week landed at 221,000.

What’s Ahead

With the CPI and PPI data releases this week, the rest of the week is very light on other data. All eyes are on the most defining inflation data reports across all markets. The Federal Reserve may have its favorite with the PCE Index, but many others, including lending partners, prefer to use the CPI and PPI as their barometer for inflation.